Post on 20-Feb-2017
transcript
Where now for the nickel market?
China Nickel Conference
May 2016
Presented by:
Nikhil Shah Principal Consultant
Nickel, Stainless Steel & Special Alloys
2 2
Disclaimer
This presentation is supplied on a private and confidential basis to the customer. It must not be disclosed in whole or in part, directly or indirectly or in any other format to any other company, organisation or individual without the prior written permission of CRU International Limited.
Permission is given for the disclosure of this report to a company’s majority owned subsidiaries and its parent organisation. However, where the report is supplied to a client in his capacity as a manager of a joint venture or partnership, it may not be disclosed to the other participants without further permission.
CRU International Limited’s responsibility is solely to its direct client. Its liability is limited to the amount of the fees actually paid for the professional services involved in preparing this presentation. We accept no liability to third parties, howsoever arising.
Although reasonable care and diligence has been used in the preparation of this presentation, we do not guarantee the accuracy of any data, assumptions, forecasts or other forward-looking statements.
Source: CRU www.crugroup.com
4 4
Recent developments
Outlook for Stainless Steel Production
Nickel costs
Prospects for Nickel Supply
Summary
Presentation structure
5
Prices at multi-year lows Open interest And LME 3-month nickel price
Source: LME, CRU
140000
160000
180000
200000
220000
240000
260000
280000
300000
7000
9000
11000
13000
15000
17000
19000
21000
23000Ja
n-1
4
Fe
b-1
4
Ma
r-1
4
Ap
r-1
4
Ma
y-1
4
Ju
n-1
4
Ju
l-1
4
Au
g-1
4
Se
p-1
4
Oct-
14
No
v-1
4
De
c-1
4
Ja
n-1
5
Fe
b-1
5
Ma
r-1
5
Ap
r-1
5
Ma
y-1
5
Ju
n-1
5
Ju
l-1
5
Au
g-1
5
Se
p-1
5
Oct-
15
No
v-1
5
De
c-1
5
Ja
n-1
6
Fe
b-1
6
LME 3 month Open interest
Data: LME
LME 3-month $/t Open interest lots
6 6
Market is shifting into deficit…
Source: CRU, LME
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
-60
-40
-20
0
20
40
60
80
100
Balance LME 3-month
'000 tonnes LME 3 month $/t
7
LME and SHFE stocks,000 tonnes Chinese trade in refined nickel, 000 tonnes
Source: LME, GTIS
…but industry stocks are high
0
100
200
300
400
500
600
Ja
n-1
4F
eb
-14
Ma
r-1
4M
ay-1
4Ju
n-1
4A
ug
-14
Se
p-1
4O
ct-
14
De
c-1
4Ja
n-1
5M
ar-
15
Ap
r-1
5Ju
n-1
5Ju
l-1
5S
ep
-15
Oct-
15
No
v-1
5Ja
n-1
6F
eb
-16
Ap
r-1
6
SHFE USA Asia Europe
-60
-40
-20
0
20
40
60
80
100
120
1Q
2013
3Q
2013
1Q
2014
3Q
2014
1Q
2015
3Q
2015
1Q
2016
Imports
Exports
Net imports
Data: CRU, GTIS.
8 8
Global stainless production growth has slowed since mid-
2014 Quarterly change in China and World ex-China stainless production y/y
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
1Q
20
13
2Q
20
13
3Q
20
13
4Q
20
13
1Q
20
14
2Q
20
14
3Q
20
14
4Q
20
14
1Q
20
15
2Q
20
15
3Q
20
15
4Q
20
15
1Q
20
16
China World ex-China Global
% change y/y
9
Decline in manufacturing, infrastructure relatively
severe from 2014…
Percentage change in China’s Manufacturing and Infrastructure fixed asset investment
0
5
10
15
20
25
30
Jan-1
3
Mar-
13
May-1
3
Jul-13
Sep-1
3
Nov-1
3
Jan-1
4
Mar-
14
May-1
4
Jul-14
Sep-1
4
Nov-1
4
Jan-1
5
Mar-
15
May-1
5
Jul-15
Sep-1
5
Nov-1
5
Jan-1
6
Mar-
16
Y/Y Change (%)
Manufacturing FAI Infrastructure FAI Poly. (Manufacturing FAI) Poly. (Infrastructure FAI)
-10%
0%
10%
20%
30%
40%
50%
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
China IP
GDP (Nominal)
Apparent Stainless Steel Consumption
10
…but government ramped up policy support
• Interest rates:
6 cuts since October 2014 – scope for another
1 or 2
• Special Construction Fund:
RMB800bn in 2015 - further RMB1trn for
2016H1
• Local government debt swap:
cut interest and capital payments by ≈ 0.5% of
GDP in 2015 – expanding in 2016
• Mortgages:
down payment requirements lowered
• Fiscal deficit:
expanded by 1.7% of GDP in 2015 - further
increase of around 1% this year
• Reforms:
Deregulation
Migrants and urbanisation
11
12
13
14
15
16
17
18
Jan
-14
Ap
r-14
Jul-
14
Oct-
14
Jan
-15
Ap
r-15
Jul-
15
Oct-
15
Jan
-16
TSF + local govt bondsTSF
Credit growth has rebounded since mid-2015
% y/y
Note: Credit defined as Total Social Financing plus local government bonds.
Data: CRU
11
…which is starting to lift investment, including in
real estate a key driver of metals demand
-5
0
5
10
15
20
25
30 Infrastructure Real estate
Heavy industry Light industry
Other
Fixed asset investment by sector y/y% 3 month moving average
Note: Infrastructure includes utilities
Data: CEIC, CRU
20
25
30
35
40
45
50
1995 2000 2005 2010 2015 2020
Household consumption
Investment (GFCF)
Rebalancing f rom investment to consumption
% of nominal GDP
Data: CEIC, CRU
12 12
Stainless production million tonnes
Ex-China to make a greater contribution to global
stainless growth over the next five years
-4
-2
0
2
4
6
8
10
12
14
16
18
2006-2010 2011-2015 2016-2020
China
ex-China
Global stainless growth
13 13
Demand growth to recover from poor 2015
Global nickel demand m tonnes Percentage change %
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
0.0
0.5
1.0
1.5
2.0
2.5
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Stainless Non-stainless % Change in global demand
14
Curtailments have trickled in… Curtailments since the start of 2015 excluding NPI
Curtailments have been slow
to come but now total around
157,000 tpy excluding
Chinese NPI.
The impact on nickel supply
may be less as some of the
feed could be processed
elsewhere, for example in the
case of QNI in Australia.
Australia
Brazil
China
Canada
Japan
Kosovo
Macedonia
Spain
Venezuela
15
…and will lead to a fall in nickel supply in 2016
Percentage change in nickel supply
-20
-15
-10
-5
0
5
10
Rest of world
China
Global
16
Risk of further cuts with around 56% of capacity under
water at $9,000/t Business cost curve for 2016 $/t
0
5,000
10,000
15,000
20,000
25,000
0 200 400 600 800 1000 1200 1400 1600 1800
$9,000/t
17
•We forecast global nickel demand to rise by 2.3% this year.
•Curtailments will see global supply fall by 4.3% this year.
This will shift the market into deficit in 2016.
•The deficits are expected to persist over the next few years
assuming there is not a hard landing in China.
• However, the market has built up a large overhang of
stocks following 5 years of surpluses and this will take time
to work off.
Summary