in 48 hours earlier this month: the player who was squeezed to the point of making billions of paper losses each day is the world’s biggest producer of nickel, Tsingshan Holding Group.
That’s the theory, at least. The problem is that not all nickel is created equal. Tsingshan made its name producing not the highly purified plates and briquettes which are traded on the LME as Class 1 nickel, but nickel pig iron or NPI – lumps of low-grade metal that can be fed into electric furnaces as a low-cost way of producing stainless steel, the destination of about three-quarters of the world’s nickel.That helps explain why Tsingshan was unable to cover its trading position.
That revolutionised the nickel market during the 2010s, leading to an explosion in production from Indonesia and the Philippines, whose low-grade ores aren’t well-suited for refining into Class 1 metal., barely worth counting a few years ago, will rise to about 1.3 million tonnes in 2030, equivalent to about half of last year’s output. Miners and battery companies are again looking to bypass Class 1 metal.
Its uniformity makes trading alternative products easier, too. NPI and MHP are typically priced at a discount to the refined metal, adjusted based on their chemical composition, ease of processing and transport costs.