Chinese nickel sulphate prices weaken further in early August amid seasonal dip
Chinese nickel sulphate prices weakened further in early August as low demand for nickel cobalt manganese (NCM) cathodes pushed prices lower.
Average prices for nickel sulphate in China declined 1.9% to RMB 26,500 ($3,710) per tonne in the two week period ending 14 August, according to theBenchmark Nickel Price Assessment.
Downstream demand has been limited in recent weeks due to the typical seasonal trend, where prices tend to soften in June, July and August as buying interest wanes following strong demand in the first half of the year.
“So far demand has dried up during the third quarter,” said Spencer Ingall, an analyst at Benchmark.
“Typically nickel sulphate markets in China follow a seasonal pattern, with strong to moderate demand throughout January to May, then a lull through the summer months with demand then improving from September to the end of Q4,” said Ingall, adding that demand is unlikely to improve for the rest of the year.
Are we reaching the price floor?
The rally in Chinese nickel sulphate prices in the first half of the year usually ends in May or June and this year prices began to come off in late May. Despite the recent offset, Chinese nickel sulphate prices are still up 8% so far this year, according to theBenchmark Nickel Price Assessment.
“Market participants have expressed doubt over just how much further prices can decline, despite the seasonal trend. There’s still some time left before we typically start to see seasonal demand improvement in late Q3 and into Q4, so prices have the potential to fall below last year’s low of RMB 25,000. It wouldn’t be surprising to see prices fall beneath this point although the market’s general expectation is that we must be close to the floor around this level” said Ingall.
In the past five years Chinese nickel sulphate prices reached their lowest level of RMB 23,000 ($3,278) per tonne in March 2020.
What does it mean for sulphate producers?
“Sulphate producers are seeing their margins squeezed at the moment,” said Ingall, adding that mixed hydroxide precipitate (MHP) producers are in a stronger position.
“With MHP producers showing price discipline and keeping payables in the high 70s despite offers coming in at lower payable levels, they are able to maintain good profit margins at the expense of the sulphate refiners,” said Ingall.
Nickel MHP CIF Asia prices have increased 6.3% to $12,501 per tonne so far this year, according to theBenchmark Nickel Price Assessment. Prices have however declined 21% since late May.
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