Toronto-based Sherritt International remains bullish on nickel due to the strong demand expected from the electric vehicle (EV) battery market. The company released its Q2 numbers on July 29 with strong nickel and cobalt production. The company’s nickel guidance at Moa Joint Venture remains unchanged at 32,000-34,000mt for the year. In H1 (January-June), total nickel production was at 16,836mt, according to the company’s earnings release.
The long-term outlook remains bullish with several automakers and governments announcing plans for significant investment for the expansion of EV production capacity. Demand is expected to increase exponentially as the world phases out the internal combustion engine.
Nickel prices recovered sharply in Q2 closing at $8.37/lb on June 20, up by 15pc from the beginning of the quarter owing to several market developments, notes Sherritt. Nickel prices fell in early March triggered by Tsingshan’s announcement to supply 100,000mt of nickel intermediate product amenable for use in EV batteries starting October 2021.
Nickel supply concerns lifted prices after Indonesia planned to put restrictions on the construction of new nickel pig iron (NPI) and ferronickel smelters. China’s enormous appetite for nickel for stainless steel production started to raise supply concerns for nickel. Labour strikes at Ontario nickel operations also led to a widening of supply concerns.
LME nickel inventories have fallen 12pc to 232,476mt by June 30 given the global economic recovery from the pandemic coupled with the growth in electric vehicle sales. Inventory levels at Shanghai Futures Exchange fell to 4,982mt from 8.972mt at the beginning of Q2.
Nickel supply deficit has been forecast for 2021 by many leading analysts against a nickel surplus at the start of 2021.
Sherritt’s production and sales
Finished nickel production in Q2 was reported at 4,230mt, 2pc higher than the year-ago quarter. From January-June, 8,418mt was produced, 5pc above the prior-year period. The company produces nickel from its Joint Venture (JV) Moa where the company has 50pc interest.
Nickel sales in Q2 stood at 4,268mt, 2pc higher from Q2 2020. In H1 production jumped up by 6pc to 8,445mt from H1 2020. The average reference price for nickel in Q2 was $7.78/lb, 42pc higher than Q2 last year. The average realized price has zoomed by 26pc to $9.46/lb in Q2 from the prior-year quarter.
The company’s Q2 revenues rose to CAD142.2mn ($114.18mn), up by 23pc from the previous quarter.