Wu Bing: Nickel supply-demand imbalance boosts prices, players should be cautious

Asian Metal: Hi, Mr. Wu. Thank you very much for accepting Asian Metal's interview. We learn that your company specializes in various products like nickel cathodes and nickel salt. Could you please introduce your company and development direction first?

Wu: The company is mainly engaged in chemical products, our business around metal products has gradually narrowed, mainly due to limited room for profits and large capital input. I decided to develop the chemical products business with the growth in demand for chemical products. Our company has clear advantages in nickel salt, copper salt, chromium salt and chemicals, and prices are even lower than those from some large firms in Shanghai.

We are focusing on the chemical products market at present. With rapid growth in the new energy industry, the chemical products market will definitely see favorable demand in the near future.

Asian Metal: What is behind the nickel price surge at the beginning of 2014? What do you think about it?

Wu: Prices for nickel began to rise at the beginning of this year, mainly as Indonesia's export ban on nickel ore caused concerns about supply. Nickel prices rose significantly in April, since political tensions in Ukraine further pushed up figures. In my opinion, the price hikes in nickel are not only because of speculation, and there is indeed demand with a supply shortage of nickel. The price of nickel on the LME has been raised to over USD20,000/t recently, and the appreciation is attributed to adjustment in supply and demand instead of speculation. The supply balance has been disrupted, and supply shortages may gradually intensify. Vale's nickel factory in Brazil has halted production, causing more concerns about nickel supply and driving up prices significantly.

Asian Metal: Has demand for nickel from end users and stainless steel mills indeed improved? Will an overcapacity in stainless steel restrict nickel prices?

Wu: I think that demand from stainless steel mills has not improved significantly. Mergers have occurred between large stainless steel mills and smaller ones in recent years, which influenced raw material demand. The nickel market is experiencing change at present and prices are becoming more reasonable, but there is still irrationality as prices increased too rapidly. Some mills may purchase raw materials ahead of time due to the price increases but actual demand has not improved. I think that the situation regarding stainless steel overcapacity has improved and inventories are steadily decreasing gradually.

Asian Metal: In your opinion, has demand for nickel sulfate from the new energy industry improved? Will traditional nickel consumption structures change with the development of the new energy industry?

Wu: Demand for nickel from the new energy industry is sure to increase. New energy industries mainly includet he battery industry and power supply industry. Some manganese sulfate and lead-zinc battery enterprises may develop NiH batteries and ternary materials as the government encourages environmentally-friendly new energy industries to develop. Meanwhile, more overseas-funded enterprises are also entering China to expand the NiH battery and ternary materials markets. Given the above two aspects, demand for nickel from the new energy industry has clearly increased in the past two years and supplies of nickel sulfate and other nickel salts from Jinchuan Group Co., Ltd and Jien Nickel have grown significantly.

The traditional consumption structure will find it hard to change despite the developments in new energy. Raw materials purchasing by manufacturing enterprises in this field is very different. Some large and high-end manufacturing enterprises mainly purchase high-quality nickel sulfate and nickel salts, such as products from Jien and Umicore. However, supply of these products is limited. Mid-sized manufacturing enterprises purchase nickel sulfate from Jinchuan Group, or sulfate nickel from other brands. The market share of high-end nickel sulfate remains small and demand is struggling improve significantly due to high production cost.

Asian Metal: How is supply and demand in the spot market for imported nickel? Does the persisting tension between Ukraine and Russia have a significant influence on the Russian nickel market?

Wu: Rather than tight supply, any difficulty purchasing Russian nickel is mainly because of soaring prices as suppliers are reluctant to sell at current levels amid such a positive outlook. In general, steel mills purchased nickel in advance given the higher prices, and demand for nickel from Russia and Jinchuan is increasing.

I think that there are profits in importing Russian nickel. Concerns about Russian supply are reasonable as sanctions against Russia from the EU and US will limit nickel exports if the current tension continues to deteriorate. Russia puts certain quotas on exporting nickel to the EU, US and China. The EU and US will accelerate consumption of stocks on the LME if imports of Russian nickel decreases, while China can import more nickel from Russia. This seems to be positive for the Chinese market.

Asian Metal: Do you think the nickel market will be influenced by environmental protection?

Wu: Demand from the electroplating and stainless steel industries will be influenced as some electroplating plants and small stainless steel mills will shut down as a result of the inspections. However, we believed that this shake-up is the only route towards healthier development. Eliminating small plants and outdated processes makes more room for production and development from new environmentally-sustainable protecting processes at larger enterprises, which can improve economic performance and benefit market development.

Asian Metal: Will the government roll out some sort of stimulus this year to boost development of the economy and non-ferrous metals market?

Wu: I don’t think that any relevant stimulus will be released. The high-speed rail and national power grid projects have been in progress for some time, but could not boost the market significantly. The improvement in the nickel market this year has little to do with national policies.

Asian Metal: Do you have any advice to operators in the nickel industry? What do you think about the market outlook in 2014?

Wu: Nickel prices have increased excessively fast by nearly 50% so far this year without any improvement in fundamentals. Prices of USD18,000/t are more appropriate and the increases have beaten all expectations, so the range of any future increase will be limited and prices are likely to fall back. Investors have been very careful about operating at current prices, so participants in China and abroad should deal with the appreciation cautiously.

Asian Metal: Thank you for your corporation and we hope you company flourish.