This is already a theory. The problem is, not all nickels are created equal. Qinshan got its name not from the production of highly refined plates and briquettes sold as grade 1 nickel in the LME, but from nickel iron or NPI, low quality metal pellets that can be fueled at low cost in electric furnaces. The stainless steel producer occupies about three-quarters of the world’s nickel destination. This helps explain why Qingshan was unable to achieve its trading position. Although it produces a lot of nickel, almost none are of the high quality achieved by LME.
This is a problem beyond the trade turmoil this month.
Decades ago Grade 1 metal was the most useful way to enter the range of nickel steel, alloys, electrical coatings, and other minor applications in which it is used. However, refining a metal from a 99.8% purity mineral until the alloy dissolves at its low concentration can be a futile and time-consuming process. Since nickel last reached $ 51,600 per ton in 2007, Chinese metallurgists have turned to NPI, a cost-effective yet emission-intensive way to obtain ready-made metal, which has a similar elemental concentration to steel. stainless ready.
This revolutionized the nickel market in 2010 and led to a boom in production from Indonesia and the Philippines, whose low-quality ores were not suitable for processing as grade 1 metals.
The same process is currently underway for battery materials. Nickel 28 Capital Corp. predicts that demand for electric vehicles, which was almost unpredictable a few years ago, will rise to around 1.3 million tons by 2030, roughly half of last year’s production. Miners and battery companies are still trying to circumvent the Class 1 metal: BHP Group produces nickel sulfate crystals from mines in Australia, while Qingshan and other Chinese companies have developed a mixed hydroxide precipitate, or MHP, a product rich in nickel and battery elements. .
What is the role of grade 1 nickel in a world where the two largest end markets are supplied by alternative products? This is not zero: due to its high purity, Grade 1 can function as a kind of oscillating product to compensate for the shortage of stainless steel and battery materials on the market when there is not enough NPI and MHP. Its uniformity also facilitates trade in alternative products. NPIs and MHPs are generally priced at discounted prices for refined metal adapted to their chemical composition, ease of processing, and shipping costs.
This is not unusual. Most of the world’s crude is not the light, sweet kind on which the Brent and West Texas Intermediate contracts are based. Most metals are not traded as fine cathodes and briquettes, but as concentrates of dust and slates, which are almost as diverse as the rocks they are processed from.
However, benchmarks that do not reflect their market are rapidly losing their usefulness. Over the decades, grade 1 nickel has dropped from about two-thirds of the world’s nickel to about one-third. This number will decrease further as battery components account for a larger share of demand. Metals producers and consumers do not want their cash flows to be held hostage by illiquid goods they cannot trade.
Solving this problem won’t be easy. Grade 1 nickel may not be a liquid, but less complex products that could question its benchmark role would not trade such substantial volumes to replace it, especially given the shortcomings of their less standardized structure. Nickel is unlikely to see the turmoil in the near future as the last $ 100,000 tons, but if producers and consumers can’t agree on a more reliable pricing standard, this won’t be the last problem on the market.
Source: Washington Post
Jason Jack is an experienced technology journalist and author at The Nation View. With a background in computer science and engineering, he has a deep understanding of the latest technology trends and developments. He writes about a wide range of technology topics, including artificial intelligence, machine learning, software development, and cybersecurity.