January 11, 2023

Tsingshan Holding Group Co., which is the world’s largest nickel producer, is reportedly in talks with several struggling Chinese copper smelters about switching to nickel processing, according to Bloomberg. This move, if successful, would essentially double China’s refined nickel to approximately 360,000 mt/yr. AEGIS notes this is the second expansion announcement by Tsingshan in as many months. In mid-December, the company announced plans to open a 50,000 mt/yr plant in Sulawesi, Indonesia by July 2023. According to unnamed sources recently interviewed by Bloomberg; however, Tsingshan might decide to double the size of the proposed Indonesian plant to 100,000 mt/yr. In 2021, total global refined nickel production was 2.7876 million mt, according to Shanghai Metal Market.  (Sources: Bloomberg, Reuters, Shanghai Metal Market)

As Bloomberg recently stated, the recent moves by Tsingshan “could reshape global supply dynamics and inject fresh volatility into the battered nickel market.” However, nickel end users such as stainless-steel producers can mitigate this potential volatility by hedging with swaps. Such positions are standard for consumer hedging; however, they can result in opportunity costs or cash costs if metal prices decrease. Please contact AEGIS for specific strategies that fit your operations. (1/11/2023)

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