Graphic: Doubts cast on plans for deluge of new nickel supply

Hanwa

21/11/2018 14:19

* Market spooked by estimated cost of HPAL plant
    * Building HPAL facility more complicated than NPI smelter

    By Pratima Desai
    LONDON, Nov 21 (Reuters) - Expectations of a supply
avalanche hitting the nickel market next year due to new
capacity in Indonesia have sent prices to seven-month lows, but
analysts doubt the plans spearheaded by Chinese firms can be
carried out so quickly.
    Benchmark nickel  CMNI3  on the London Metal Exchange
nearing $11,000 a tonne is down more than 15 percent since late
September, partly due to the U.S.-China trade dispute
undermining demand for the metal used in stainless steel. 
    
    Nickel is also vital for the lithium-ion batteries used to
power electric vehicles, where demand is set to accelerate
exponentially over coming years.  urn:newsml:reuters.com:*:nL8N1XI67P
    
    This is why companies in China, which dominates electric
vehicle battery production, need to secure nickel supplies.
    That includes GEM  002340.SZ , which recently announced it
was teaming up with Contemporary Amperex Technology  300750.SZ 
(CATL) and Tsingshan Holding Group to invest $700 million in an
Indonesian project to produce battery-grade nickel chemicals.
 urn:newsml:reuters.com:*:nL4N1WD451
    Also involved is Japanese trading house Hanwa  8078.T ,
which in a release said production would start in 2019. 
    The consortium aims to establish a 50,000-tonne
high-pressure acid leach (HPAL) facility at Tsingshan's
industrial park in Morowali, on the Indonesian island of
Sulawesi, to produce nickel and cobalt chemicals.
    "There is panic about supply, but the Tsingshan project
isn't going to hit the market next year. It will take two to
three years," said Jim Lennon, managing director of Red Door
Research.
    GEM, CATL and Tsingshan did not respond to requests for
comment.
    A source at one of the Chinese partners said construction
may start at the end of 2019 after a site had been selected and
the equipment ordered and delivered, but that the date may be
pushed back to 2020.
    "What also spooked everybody was that they said it was going
to cost $700 million," Lennon said. 
    "Pretty much every HPAL project has taken longer and cost
more than was originally announced."
    One example analysts cite is Ambatovy in Madagascar. On its
website, Ambatovy says the project cost $8 billion and will have
capacity to produce 60,000 tonnes of nickel.
    Japan's Sumitomo Corp  8053.T  recently cut its forecast for
nickel output at its Ambatovy project to slightly above 40,000
tonnes in the year to March 31, 2019, below the May projection
of 48,000 tonnes.  urn:newsml:reuters.com:*:nT9N1WP00I
    Tsingshan's success in ramping up nickel pig-iron (NPI)
production in Indonesia has led the market to think the top
producer could repeat that in chemicals. 
    But building an HPAL facility is significantly more
complicated than an NPI smelter.
    "Tsingshan's ambition comes as no surprise, but it is not
possible to build an HPAL plant of that size in 12 months," said
Wood Mackenzie analyst Sean Mulshaw.
    Mulshaw added: "It is also not possible to build one of that
scale for as little as $700 million.
    "Tsingshan's ultimate objective is credible. However, we are
not convinced that a new 50,000 tonnes a year HPAL plant will be
in operation before end-2019."
    
    Stainless steel will account for about two-thirds of global
nickel demand at 2.2-2.3 million tonnes this year, while battery
demand is estimated at 4 percent.
    By 2025, nickel demand from stainless mills is forecast at
63 percent and batteries at about 10 percent.
    Electric vehicles are a factor behind forecasts for
deficits, which Lennon expects at 155,000 tonnes this year and
74,000 tonnes in 2019.
    Deficits have been covered by draws on stocks, which in
LME-registered warehouses stand at 215,000 tonnes, down more
than 40 percent since January.
    
    

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Nickel consumption    https://tmsnrt.rs/2PH4wGB
Nickel demand growth    https://tmsnrt.rs/2PIbfA4
Nickel price    https://tmsnrt.rs/2PIbhI8
Nickel stocks    https://tmsnrt.rs/2PHVZmp
Investment funds short LME nickel    https://tmsnrt.rs/2PG4zSU
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 (Reporting by Pratima Desai; additional reporting by Tom Daly
in Beijing; editing by Dale Hudson)
 ((pratima.desai@thomsonreuters.com; +44 207 542 5113;))