Nickel: State of the market November 2017 HSEC Management
• Key toolkit – SAFENICKEL • Rolled out globally
• Focussed on: • Fatal hazard protocols • Life saving behaviours • Catastrophic risk management
• Target ZERO HARM
• Zero fatalities 2016 and 2017 year to date.
• Total recordable injury frequency rate down -30% in the last 4 years to < 5.
2 Glencore Nickel Operations
3 Significant structural deficits
• We estimate a 170Kt nickel supply shortage for 2017, as very strong demand offsets supply gains.
• Market tightness is evident in high and rising premiums and substantial stock draws from peak levels.
• Significant structural supply deficits, before the contribution of battery demand becomes material.
Nickel market balance (Kt Ni) Balance Cumulative Balance 600 500 400 300 200 100 0 -100 2011 2012 2013 2014 2015 2016 2017F 2018F -200
4 Source: Glencore Global nickel inventory (Kt Ni) – Sizable decreases
• Global nickel inventory down from a peak of 900kmt to 650kmt today.
LME 1000 SHFE China other (excl. SRB) 800 182 Other (excl. SRB) - 25Kt 136 600 - 74Kt 157 112 - 66Kt 62 400 46
470 200 - 90Kt 380
0 Peak Current
5 Source: Glencore, LME, SHFE Gains in 300-series stainless drive nickel demand growth
• We see very strong growth in global nickel demand in stainless:
• Chinese stainless steel Growth driven firmly by 300-series output (+7%). • Ramp up of Indonesian stainless capacity 2Mtpa 300-series capacity operational. Additional 1Mtpa to be commissioned H1 2018. • Ex-China/Indonesia 2017 stainless growth at 4%.
• We estimate 2017 primary Ni demand in stainless will increase by almost 9% to more than 1.5Mt. We forecast continued growth for 2018 and beyond.
World crude stainless output by grade (Mt) Primary nickel demand in stainless (Kt Ni) 300-series 200-series & duplex 400 series Other World China Indonesia 50 1'600
40 1'200
30 800 20 400 10
0 0 2015 2016 2017F 2018F 2015 2016 2017F 2018F 6 Source: Glencore Strong nickel demand across all regions and industries
• Positive developments in non-stainless further support solid demand growth:
• Oil & Gas We’ve seen a steady return of demand, reflected in strongly improved offtake from special steel and nickel based alloy producers. • Automotive A solid upswing in the European automotive market provides additional support to special steel. • Batteries Strong growth in Korea, Taiwan and China with nickel consumption tracking +25% YoY.
• We estimate 2017 global primary nickel demand increased by more than 9% to over 2.2Mt.
Global primary nickel demand by industry (Kt Ni)
2'500 Stainless Special Steel Ni based alloys Plating Others Battery
2'000
1'500
1'000
500
0 2015 2016 2017F 2018F 7 Source: Glencore Widespread underperformance in non-NPI supply/NPI supply up
• We estimate non-NPI supply will decrease by 2% this year, reflecting price-induced closures, production issues and general supply disruptions.
• We nevertheless forecast global supply to grow by 5% in 2017 to 2.06Mt.
• Increased ore availability enabled Chinese NPI production to rise to 390-400Kt Ni this year (361Kt Ni in 2016).
• 2017 Indonesian NPI production increased as PT SMI phase III commissioned and all phases ramped up. 2017 production forecast at 178Kt Ni.
Global non-NPI supply (Kt Ni) Nickel pig iron supply (Kt Ni)
1600 800 Chinese NPI Indonesian NPI
600 1400
400
1200 200
1000 0 2015 2016 2017F 2018F 2015 2016 2017F 2018F 8 Source: Glencore Nickel market balance
2015 2016 2017 2018 Nickel market balance (Kt Ni) Global Supply (Kt) 1,985 1,964 2,059 2,153 Supply Demand -2.5% -1.1% 4.8% 4.6% 2'300 Sulphide 804 785 752 700 Laterite 1,181 1,179 1,307 1,453
Hydro-metallurgical 306 273 263 261 2'200 Pyro-metallurgical 874 906 1,043 1,192
China NPI 403 361 395 480 Indonesia NPI 29 91 178 228 2'100 Other FeNi/Matte 442 453 471 484
Global Demand (Kt) 1,896 2,036 2,226 2,293 2'000 -0.2% 7.4% 9.3% 3.0%
China 1,013 1,125 1,210 1,226 Indonesia 0 2 53 191 1'900 Europe 334 336 353 329 US 120 114 137 121 Japan 133 141 146 152 Korea 79 86 82 68 1'800 Taiwan 69 70 74 56 India 50 68 77 65 Other 99 94 93 85 1'700 Global Balance / Surplus (Kt) 89 -72 -167 -140 2015 2016 2017F 2018F 9 Source: Glencore And all this with very limited primary nickel demand in batteries
• Short-term growth potential driven by substitution within the Li-ion battery segment to NMC/NCA cathodes, and within the NMC cathode segment towards higher Ni-content chemistries.
• Long-term growth potential reflecting the projected growth trajectory of EVs and ESS. Even the lower end of the range of forecast EV penetration generates considerable Ni unit demand from 2025 onwards.
• We conservatively estimate more than 10M EVs will be sold a year in 2025 and that will generate net additional primary nickel requirements of over 400Kt Ni in 2025 only.
World rechargeable battery production (GWh) Primary nickel demand in batteries (Kt Ni) Ni-Cd Ni-MH (portable) 160 Li-Ion Ni-MH Ni-Cd 500 500 Ni-MH HEV Li-ion (portable) 140 Li-ion (EV) Li-ion (e-buses)
120 400 100 300 80 250
60 200 130 40 100 100 81 20
0 0 2010 … 2015 2016 2017F 2018F 2016 2017F 2018F 2020F 2025F 10 Source: Glencore In conclusion – An exciting market outlook
• The nickel market’s fundamentals are the best we’ve seen since 2006/2007, as evidenced by stock draws, demand rates across all geographies and physical premia, which are at 10-year highs.
• Despite additional NPI production and lower forecast demand growth rates, sizeable structural deficits will exist into the future.
• Global stocks are drawing down very quickly despite headline LME inventory suggesting otherwise.
• Battery demand will very likely be a transformational demand event, which will turbo charge primary nickel demand in the next decade.
Where will all the primary nickel needed come from?
LME Nickel price (US$/t)
55'000
45'000
35'000
25'000
15'000
5'000 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 11 Source: Glencore, LME Questions? Disclaimer
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