Knowing why the price is the price provides reasoning and guidance. Our goal is to inform; we do not predict prices. Nickel market is influenced by: 1– Fundamentals: we believe demand relative to supply ultimately determines price and relevant demand vs supply information is essential. 2– Human emotion: humans are not entirely rational beings. Herd anxieties have and will cause short-term disruptions and influence prices up and down. Herd mentality causes price movements like an irrational animal stampede. 3– Technical data: we do not utilize technical analysis in our price direction model. Using the past to predict the future does not work for our purpose.
As mentioned previously there are 3 main influences for Ni price, we have added a 4th. The China Effect: a hybrid of Demand vs Supply and human emotion. China’s demand has been 40%+ for Al/Cu/Ni and 60% of seaborne iron ore global production. Even minor consumption increases or decreases by China will affect global markets. Chinese speculators cause drastic price movements and have disrupted Ni prices.
We take a different approach to demand vs supply: Our focus is on demand; more importantly consumption compared to purchases. An example is China’s imports of industrial metals for shadow banking purposes. Ni is imported with letters of credit and warehouse receipts (rudukans in Chinese) issued. Importers have 6 months to borrow then reloan against receipts as many times as they can before Ni must be exported in order to avoid paying 17% VAT (decreased to 16% May 1, 2018). How does imported and then exported Ni show up in China’s demand statistics because its never consumed? Another example is LME stocks being re-warranted or re-directed to unapproved warehouses but not consumed. Bottom line: If you don’t know how much of what has been bought has been consumed then difference is “overhanging the market”. When unconsumed nickel re-enters the market statistics are skewed.
Our demand and supply will focus on Indonesia’s production of 300 series S S (nominally 18Cr-8Ni) from saprolite grade laterite Ni ore and 200 series S S (nominally 17% Cr-4% Ni, from lower grade limonite laterite Ni ore. China has made large scale investments in Indonesia: Advanced rotary kilns, calciners, highly efficient multi-electrode submerged-arc continuous smelting furnaces and state of the art stainless steel mills with continuous casting.
Our reason for focusing on Class ll and not Class l is because austenitic S S consumes 66% of Ni produced annually and is produced from Class ll Ni; NPI in China. China produces over 50% of global S S annually; predominately from NPI and home scrap. Chinese government instituted “China Circular Economy Promotion Law” and has organized recycling of domestic scrap and will use substantially more S S scrap going forward. Increased stainless steel scrap consumption will reduce need to import Ni ore. India, European and American S S producers get approximately 70% of their Ni from scrap. Scrap Ni units are discounted from LME price. We believe China’s Indonesian investment will engender the lowest cost production of Ni and stainless steel.
Vale and Norilsk are the largest producers of nickel. They produce nickel to sell nickel.
China produces NPI to make austenitic stainless steel.