In 2023, China's net imports of refined nickel dropped to the lowest point in nearly a decade, reflecting structural changes occurring in the global production chain.Over the past few months, as China increased imports of other forms of nickel from Indonesia, the demand for high-purity grade one nickel has been weakening.
Traditionally, the majority of Indonesian raw materials were nickel pig iron (NPI), shipped to China's stainless steel industry. Recently, trade flows include an increasing amount of matte and mixed hydroxide precipitate (MHP), which will be converted into electric vehicle batteries. The latest change is that Chinese operators have the ability to convert intermediates into refined metals, thereby increasing exports of primary materials.
Refined Metals
China has historically been a significant net importer of refined nickel to fill the gap between its relatively small refining industry and rapidly growing demand. However, the continuous growth of Indonesian nickel intermediate materials has greatly suppressed the demand for Grade I high-purity metals. Last year's imports were 91,000 tons, a 42% decrease from 2022, marking the lowest annual import volume since 2005.
However, what truly changes China's primary trading pattern is the growing export of refined metals. China has occasionally turned into a net exporting country in the past, but it was only temporary and in response to one-time events.
Emerging Sulfate Market
As battery capacity continues to expand, China has discontinued importing sulfate, with Finland and South Korea being the two main traditional suppliers. Last year saw a change in the situation, with imports from Indonesia jumping from zero to 60,000 tons. However, China is now also producing sulfate domestically for the domestic market, and export volumes are steadily rising. While the total volume of sulfate exports remains small compared to monthly imports, sulfate exports increased from 2,000 tons in 2022 to 17,000 tons last year.
It seems likely that a new sulfate sub-market is beginning to form as the processing and price gap between Grade I and Grade II nickel narrows. This may have implications for the pricing model of nickel, an already existing issue. However, this highlights the extent to which the nickel trade between Indonesia and China determines the global nickel market.