Weak NCM Demand Restrains Nickel Consumption Growth in China

Lygend

China’s nickel consumption growth has been constrained this year, primarily due to weak demand in the nickel-cobalt-manganese (NCM) cathode active material (CAM) sector and the increasing market dominance of lithium-iron-phosphate (LFP) CAM.

NEV Battery Market Trends

Despite a 37% year-on-year increase in China’s new energy vehicle (NEV) battery production from January to September, NCM battery growth lagged at 19.2%, while LFP surged by 45.6%, according to the China Innovative Alliance of Automotive Battery Industry.

• NCM precursor output grew by 4%.
• NCM CAM production rose by 10%, highlighting a slower growth trend compared to downstream NEV battery production.
• Nickel sulphate output is projected to decline by 1%, even though total supply is expected to rise by 6% due to increased imports.

The discrepancy in growth rates between upstream, midstream, and downstream sectors is expected to stabilize next year as inventories decline and buying interest increases.

Rising Imports of MHP and Matte

China’s imports of mixed hydroxide precipitate (MHP) and matte, key feedstocks for nickel sulphate and class I nickel production, have risen sharply:

• MHP Imports: Up 17% to 1.07 million tons during January-September, with Indonesia accounting for 57% growth due to increased capacity from Chinese companies such as Lygend’s ONC, GEM’s QMB project, and Huayou’s Huafei facility.
• Matte Imports: Increased by 61% to 341,494 tons, driven by the ramp-up in new capacities.

Transition in Nickel Matte Production

A significant portion of the matte imports consists of low-grade matte (20% nickel content), which is further refined into high-grade matte (70% nickel content) in China for nickel sulphate or cathode production. However, some matte producers have shifted focus to producing nickel pig iron (NPI) due to its higher profit margins.

Nickel Metal Output Outlook

While nickel sulphate production is forecast to dip, China’s overall nickel metal output is expected to surge by 34%, reaching 320,000 tons in 2024. This increase underscores the country’s reliance on imported feedstocks and growing domestic capacity to meet demand.

Future Prospects

As inventories dwindle and buying interest rebounds, 2024 is likely to see a narrowing of growth disparities across the supply chain. However, China’s nickel market remains under pressure from fluctuating demand patterns, shifts in feedstock sourcing, and competition between NCM and LFP technologies.