Abstract: Since the beginning of the new century, with the continuous breakthrough of the nickel industry equipment technology and the rapid development of the new energy industry, the global nickel industry pattern has undergone major changes, and Chinese-funded enterprises have played an important role in promoting the reform of the global nickel industry pattern. At the same time, it has also made outstanding contributions to the security of the global nickel supply chain.
Respect the Market and Respect the Market——How to Improve the Security of China's Nickel Supply Chain from the "Nickel Futures Incident"
Since the beginning of the new century, with the continuous breakthrough of the nickel industry equipment technology and the rapid development of the new energy industry, the global nickel industry pattern has undergone major changes, and Chinese-funded enterprises have played a very important role in promoting the reform of the global nickel industry pattern. At the same time, it has also made outstanding contributions to the security of the global nickel supply chain. But the price of London nickel futures in March this year soared by an unprecedented 248% in two days, causing serious damage to real companies including China. To this end, from the changes in the pattern of the nickel industry in recent years, combined with the "nickel futures incident", the author talks about how to improve the security of China's nickel supply chain.
Changes in the global nickel industry pattern
In terms of consumption scale, nickel consumption has expanded rapidly, and China is the main contributor to global nickel consumption. According to the statistics of the Nickel Industry Branch of the China Nonferrous Metals Industry Association, in 2021, the global primary nickel consumption will reach 2.76 million tons, a year-on-year increase of 15.9% and 1.5 times the consumption in 2001. Among them, in 2021, China's raw nickel consumption will reach 1.542 million tons, a year-on-year increase of 14%, 18 times the consumption in 2001, and the proportion of global consumption has increased from 4.5% in 2001 to the current 56%. It can be said that 90% of the increase in global nickel consumption since the beginning of the new century came from China.
From the perspective of consumption structure, stainless steel consumption is basically stable, and the proportion of nickel used in the battery field continues to increase. In the past two years, the new energy sector is leading the growth of global primary nickel consumption. According to statistics, in 2001, in China's nickel consumption structure, nickel for stainless steel accounted for about 70%, nickel for electroplating accounted for 15%, and nickel for batteries accounted for only 5%. By 2021, the proportion of nickel used in stainless steel in China's nickel consumption will be about 74%; the proportion of nickel used in batteries will rise to 15%; the proportion of nickel used in electroplating will drop to 5%. It has never been seen that as the new energy industry enters the fast lane, the demand for nickel will increase, and the proportion of batteries in the consumption structure will further increase.
From the perspective of the supply pattern of raw materials, nickel raw materials have been converted from nickel sulfide ore mainly to laterite nickel ore and nickel sulfide ore jointly dominated. The former nickel resources were mainly nickel sulfide ore with very concentrated global resources, and nickel sulfide resources were mainly concentrated in Australia, Canada, Russia, China and other countries, accounting for more than 50% of the total global nickel reserves at that time. Since the beginning of the new century, with the application and promotion of laterite nickel ore-nickel-iron technology in China, laterite nickel ore in Indonesia and the Philippines has been developed and applied on a large scale. In 2021, Indonesia will become the world's largest nickel producer, which is the result of the combination of Chinese technology, capital and Indonesian resources. The cooperation between China and Indonesia has made important contributions to the prosperity and stability of the global nickel supply chain.
From the perspective of product structure, nickel products in the circulation field are developing towards diversification. According to the statistics of the Nickel Industry Branch, in 2001, in the global primary nickel production, refined nickel accounted for the main position, in addition, a small part was nickel ferronickel and nickel salts; by 2021, in the global primary nickel production, refined nickel production accounted for It has dropped to 33%, while the proportion of NPI (nickel pig iron) nickel-containing production has risen to 50%, and the traditional nickel-iron and nickel salts accounted for 17%. It is expected that by 2025, the proportion of refined nickel in the global primary nickel production will further decline. In addition, from the perspective of China's primary nickel product structure, about 63% of the products are NPI (nickel pig iron), about 25% of the products are refined nickel, and about 12% of the products are nickel salts.
From the perspective of changes in market entities, private enterprises have become the main force in the nickel supply chain in China and even the world. According to statistics from the Nickel Industry Branch, among the 677,000 tons of primary nickel output in China in 2021, the top five private enterprises, including Shandong Xinhai, Qingshan Industry, Delong Nickel, Tangshan Kaiyuan, Suqian Xiangxiang, and Guangxi Yinyi, produced primary nickel. accounted for 62.8%. Especially in terms of overseas industrial layout, private enterprises account for more than 75% of the enterprises with overseas investment, and a complete industrial chain of laterite nickel mine development-nickel-iron-stainless steel production has been formed in Indonesia.
The "nickel futures incident" has a significant impact on the market
Impacts and problems exposed
First, the price of LME nickel futures rose violently from March 7th to 8th, with a cumulative increase of 248% in 2 days, which directly led to the suspension of LME futures market and the continuous rise and fall of Shanghai nickel on the Shanghai Futures Exchange. The futures price not only loses its guiding significance to the spot price, but also creates obstacles and difficulties for enterprises to purchase raw materials and hedging. It also disrupts the normal production and operation of nickel upstream and downstream, causing serious damage to global nickel and related upstream and downstream entities.
The second is that the “nickel futures incident” is the result of the lack of corporate risk control awareness, the lack of corporate awe of the financial futures market, the inadequate risk management mechanism of the LME futures market, and the superposition of geopolitical mutations. However, from the perspective of internal factors, this incident has exposed the problem that the current western futures market is far away from production and consumption areas, cannot meet the needs of the real industry, and the development of nickel derivatives futures has not kept up with the development and changes of the industry. At present, developed economies such as the West are neither large consumers of non-ferrous metals nor major producers. Although the warehousing layout is all over the world, most port warehouses and warehousing companies are controlled by old European traders. At the same time, due to the lack of effective risk control methods, There are hidden dangers when entity companies use their futures tools. In addition, the development of nickel derivatives futures has not kept up, which has also increased the trading risks of nickel-related peripheral products companies when implementing product value preservation.
About Upgrading China's Nickel Supply Chain
Some Inspirations from Safety Issues
First, adhere to bottom-line thinking and take the initiative in risk prevention and control. The non-ferrous metal industry has typical characteristics of marketization, internationalization and financialization. Therefore, industry enterprises should improve the awareness of risk prevention, establish bottom-line thinking, and improve the application level of risk management tools. Entity enterprises must respect the market, fear the market, and regulate their operations. Enterprises “going out” must be fully familiar with international market rules, make emergency response plans, and avoid being hunted and strangled by overseas speculative financial capital. Chinese-funded enterprises should learn from experience and lessons.
The second is to accelerate the process of internationalization of China's nickel futures and improve the pricing power of China's bulk commodities. The "nickel futures incident" highlights the importance and urgency of promoting the internationalization of relevant non-ferrous metal futures, especially in terms of accelerating the promotion of international plates of aluminum, nickel, zinc and other varieties. Under the top-level design, if the resource country can adopt the market-oriented procurement and sales pricing model of "international platform, bonded delivery, net price transaction, and RMB denomination", it will not only establish China's image of a firm market-oriented trade, but also enhance China's bulk commodity pricing capabilities. It can also reduce the hedging risk of overseas Chinese-funded enterprises. In addition, it is necessary to strengthen the research on the changes of the nickel industry, and step up the cultivation of nickel derivative futures varieties.
About Upgrading China's Nickel Supply Chain
Some Inspirations from Safety Issues
First, adhere to bottom-line thinking and take the initiative in risk prevention and control. The non-ferrous metal industry has typical characteristics of marketization, internationalization and financialization. Therefore, industry enterprises should improve the awareness of risk prevention, establish bottom-line thinking, and improve the application level of risk management tools. Entity enterprises must respect the market, fear the market, and regulate their operations. Enterprises “going out” must be fully familiar with international market rules, make emergency response plans, and avoid being hunted and strangled by overseas speculative financial capital. Chinese-funded enterprises should learn from experience and lessons.
The second is to accelerate the process of internationalization of China's nickel futures and improve the pricing power of China's bulk commodities. The "nickel futures incident" highlights the importance and urgency of promoting the internationalization of relevant non-ferrous metal futures, especially in terms of The promotion of international plates of aluminum, nickel, zinc and other varieties is accelerating. Under the top-level design, if the resource country can adopt the market-oriented procurement and sales pricing model of "international platform, bonded delivery, net price transaction, and RMB denomination", it will not only establish China's image of a firm market-oriented trade, but also enhance China's bulk commodity pricing capabilities. It can also reduce the hedging risk of overseas Chinese-funded enterprises. In addition, it is necessary to strengthen the research on the changes of the nickel industry, and step up the cultivation of nickel derivative futures varieties.
Post time: Apr-12-2022