Nickel: short-term and long-term perspectives
On March 7, LME (London Metal Exchange) has introduced a restriction on the return of funds, and also allowed a delay in delivery for those who found themselves in a difficult position. Nevertheless, as the prices of nickel rises, short positions began to experience growing pressure, which prompted the stock exchange to stop trade in Nickel. Before LME decided to suspend trading, nickel prices increased significantly. Since the opening of the markets on March 7, there was an unprecedented rise in prices for nickel, which cannot be explained by supply and proposal. Nevertheless, the rise in prices largely affected the strengthening of fundamental indicators, since the demand from the manufacturers of electric vehicles rapidly.
Although nor Norilsk Nickel nor individual export deliveries have not yet been sanctions, there is some uncertainty regarding logistics and payments of the company.
Considering the short-term perspective, China already imports some Russian metals. Considering China’s consumption, asian country is quite Could buy more Russian products. Thus, if the participants of the metals will be able to change the delivery places, the interruptions can ultimately be limited. A steady deficit will occur only if Russian metallurgical enterprises will be in a difficult position due to the fact that neither China nor other countries use them.
Considering the long-term perspective, the fundamental prospects of nickel at the moment remain stable due to growth expectations Sales of electrical vehicles. Given the current technology of batteries, the consequences for nickel consumption are relatively simple: it is expected that by 2030 consumption will increase to a little less than 1.8 million tons compared with about 200 thousand tons this year. Taking into account the exponential growth in demand, the key problem of the nickel market is the degree in which mining companies will be able to prevent any shortages.
While China, in particular, invests in Indonesia, In order to prevent any shortage of resources, we assume that competition for Class 1 refined nickel units will be intensified in the future. Thus, Western automakers may have to actively participate in bidding for nickel units, which should maintain the prices for metal.
At the same time, it is necessary to mention that the electromotive battery industry is developing rapidly. At the moment, electromotive manufacturers begin to go to cheaper LFP batteries. (Lithium-iron-phosphate battery), not containing nickel and cobalt. According to our estimates, the cost of raw materials for the NMC battery (lithium-nickel-marganese-cobalt-oxide battery) on average over the past four years have been 46% higher than that of the LFP analogue. Especially compared to the NCA type (lithium-nickel-cobalt-aluminum-oxide battery), which can be twice as expensive.
Among the largest manufacturers of Tesla was one of the first to start the transition to LFP batteries, declaring their introduction to all its electric cars standard class. Thus, the current price volatility on nickel may well become a catalyst for faster implementation of LFP batteries, which are still used mainly in China.
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