Nickel
Nickel market conditions improved throughout the second quarter of 2020
in concert with the restart of economic and manufacturing activities in
China and Europe following the outbreak of the COVID-19 pandemic in the
first quarter of the year.
Nickel prices on the London Metals Exchange (LME) started Q2 at
US$5.12/lb and closed on June 30 at US$5.81/lb.
Although nickel prices showed signs of recovery, nickel inventory levels
on the London Metals Exchange (LME) and the Shanghai Future Exchange
(SHFE) remained relatively flat. Combined inventory levels at June 30
totaled approximately 262,000 tonnes, up from approximately 256,000 at
April 1.
Nickel inventories on the LME and SHFE have not increased significantly
despite the reduced production of stainless steel over the past several
months largely because a number of nickel mines around the world have
significantly reduced production or have gone into care and maintenance
as a result of the spread of COVID-19.
In the near term, nickel prices are expected to be volatile given the
ongoing economic uncertainty caused by the pandemic. As mining
operations resume production activities, nickel inventory levels may
rise given that supply could exceed demand as a number of industries
that are large consumers of stainless steel, such as food and
hospitality sector, will experience a delayed or slower economic
recovery.
In light of this uncertainty, a number of industry experts have lowered
their forecasts for nickel demand, reflecting negative market sentiment
through end of 2020. Previously, demand for nickel through 2025 was
expected to grow by approximately 3% per year to 2.8 million tonnes
according to market research by Wood Mackenzie. Recovery of demand is
expected to return in 2021.
Nickel pig iron production has increased substantially, and some
industry analysts are predicting an oversupplied nickel market in the
near term as a result. This development is putting additional pressure
on producers of lower-grade material such as ferronickel, which is
currently selling at significant discount.
Over the longer term, demand for nickel is expected to increase with the
increased adoption of electric vehicles since nickel – along with cobalt
– is a key metal needed to manufacture assorted energy storage
batteries.
A shortage of nickel is anticipated over the coming years since current
market prices are below incentive levels needed to develop new nickel
projects.
Review of Operations
Moa Joint Venture (50% Interest) and Fort Site (100%)
$ millions, except as otherwise noted |
2020Q2 |
2019Q2 |
Change |
2020H1 |
2019H1 |
Change |
PRODUCTION VOLUMES (tonnes) |
|
|
|
|
|
|
Mixed Sulphides |
4323 |
4306 |
- |
8337 |
8642 |
-4% |
Finished Nickel |
4147 |
3969 |
4% |
7983 |
8366 |
-5% |
Finished Cobalt |
425 |
415 |
2% |
825 |
841 |
-2% |
Fertilizer |
69777 |
59665 |
17% |
125866 |
126627 |
-1% |
NICKEL RECOVERY (%) |
86 |
86 |
- |
84 |
85 |
-1% |
SALES VOLUMES (tonnes) |
|
|
|
|
|
|
Finished Nickel |
4169 |
4073 |
2% |
7942 |
8464 |
-6% |
Finished Cobalt |
353 |
429 |
-18% |
734 |
889 |
-17% |
Fertilizer |
72071 |
66552 |
8% |
103211 |
93509 |
10% |
AVERAGE-REFERENCE PRICES (US$ per pound) |
|
|
|
|
|
|
Nickel |
5.54 |
5.56 |
- |
5.66 |
5.59 |
1% |
Cobalt |
15.19 |
15.64 |
-3% |
15.89 |
17.09 |
-7% |
AVERAGE REALIZED PRICE |
|
|
|
|
|
|
Nickel ($ per pound) |
7.51 |
7.52 |
- |
7.55 |
7.51 |
1% |
Cobalt ($ per pound) |
18.39 |
19.56 |
-6% |
18.79 |
17 |
11% |
Fertilizer ($ per tonne) |
399 |
491 |
-19% |
384 |
470 |
-18% |
UNIT OPERATING COSTS(1) (US$ per pound) |
|
|
|
|
|
|
Nickel - net direct cash cost |
3.92 |
3.83 |
2% |
4.1 |
4.19 |
-2% |
Source:
Sherritt |