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Top Chinese nickel producer Jinchuan Group wants to position itself to meet rising nickel sulfate demand for electric car batteries.
Top Chinese nickel producer Jinchuan Group (HKEX:2362) is on track to expand its production of nickel sulfate, a key component in the lithium-ion batteries used to power electric vehicles (EVs).
Jinchuan is looking to position itself to meet demand for the raw materials needed in EV batteries, which will become increasingly crucial in the next decade. It plans to raise its nickel sulfate output by 40 percent this year.
The increase will take the Asian company’s nickel sulfate production up to 70,000 MT from 50,000 MT in 2017, Simon Bao, vice general manager of Jinchuan’s marketing unit, told Bloomberg.
“While physical demand hasn’t picked up too significantly yet, it may surge in about two years,” Bao said.
According to the International Nickel Study Group, electric vehicle demand represented just 3 percent of nickel demand in 2017 — that’s compared to the two-thirds of supply that goes toward stainless steel.
However, as the popularity of electric vehicles continues to grow, the sector is expected to account for a larger amount of nickel demand. In fact, Benchmark Mineral Intelligence says nickel sulfate production will need to increase from 70,000 tonnes in 2016 to 350,000 tonnes by 2026.
Jinchuan will be able to raise sulfate production without any technical barriers, Bao explained, adding that output of nickel cathode, used in stainless steel, will be kept at 135,000 tonnes this year.
In 2016, LME nickel prices increased more than 25 percent due to a positive demand outlook. On Thursday (January 18), nickel closed up 0.5 percent, at $12,475 per tonne. Bao forecasts that the metal will average around $12,000 this year or “a little bit higher,” supported by a fall in global stockpiles.
Jinchuan also produces cobalt, another key lithium-ion battery metal, and plans to increase production by 10 percent, to 11,000 tons, this year.
Cobalt “has gone up too sharply because of speculation, and the gains are not justified by real demand,” said Bao. Cobalt metal prices surged about 145 percent last year to the highest level in almost a decade, according to Metal Bulletin data.
On Thursday (January 18), shares of Jinchuan Group closed down 0.74 percent at HK$1.34 in Hong Kong. The company’s share price has increased 12.61 percent year-to-date.
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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.
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