Nickel prices continue to rise as Chinese inventories dry up
A drop in nickel output from major mining projects in the Philippines and Indonesia has cut Chinese nickel inventories down to two year lows and, in the process, drove prices up to nine month highs at $15.414 per tonne.
Usine de nickel de Doniambo (SLN-ERAMET) en Nouvelle-Calédonie ©️Alain Jeannin
Global mined nickel production fell 7.7% in June compared to the amount mined in the corresponding month last year, according to the International Nickel Study Group, which monitors the markets.
That production rate still marks a significant improvement from the sharp comparative falls witnessed in the market in April and May. Nevertheless, year-to-date production has fallen by more than 10% to 1.1 million tonnes as coronavirus shut-downs have come into effect.
Production from the Philippines is down by 28%, production from Canada is down by 19%, and production from Indonesia by 11%.
At the same time, as Chinese stimulus money continues to filter through into new infrastructure spending, demand could rise significantly. Furthermore nickel prices will be underpinned by longer term hopes for demand highlighted by Elon Musk.
The lithium ion batteries that go into Tesla cars are primarily composed of nickel, to the point that each Model 3 contains around 30 kilograms of the metal. The energy is stored in the nickel, therefore the more nickel a battery contains, the higher the energy density of the battery.
This is an opportunity for New Caledonia’s clean nickel producers, Vale, Koniambo and the SLN, the latter breaks even at $15.000 per tonne.