October 2022
China’s reign as the ruler of demand continues to expand as the world shifts towards renewable energy, fuelling the China dominated stainless-steel and battery industries. The country is responsible for 56% of global finished demand and 24% of mined demand.

The Decarbonisation Roadmap

China is targeting a peak of emission levels by 2030, and to reach carbon neutrality by 2060. In 2021, China emitted an estimated 12.86bnt of carbon equivalents, a 4.8% increase from the previous year. This was caused by an increase in energy usage as the country resumes production after pandemic related lockdowns.

Coal consumption continues to grow, due to expanding production capacity from the manufacturing sector. In the March quarter of 2022 alone, China approved the expansion of 8.63GW of coal energy capacity due to wavering energy security.

However, China is also rapidly building out its renewable sector, with the government targeting a 600GW increase in capacity from 2021 to 2025. In 2020, renewables accounted for over 15% of total energy production.


Finished Nickel Demand

China continues to be the largest source of finished nickel demand. The country is forecast to use 415kt in the December quarter, leading to an annual demand of 1,629kt in 2022, a 5.0% growth from 2021.

This is a slight reduction in growth compared to the 5.5% in 2021, as manufacturing operations have been largely disrupted by district and city-wide Covid lockdowns.

Logistics and transportation of materials have also been affected. Stainless-steel production has been reduced by about 3.5% y-o-y. While production of 300 series, which contains about 6-20% nickel, have decreased by almost 10% y-o-y.

Finished nickel demand is expected to grow at an CAGR of 2.8% to reach 1,870kt by 2027. As demand from stainless-steel gradually climbs, demand from batteries is expected to balloon, as the world pushes for decarbonisation. Demand for higher-grade products will increase.

There is a proliferating preference for Chinese EV manufacturers to prefer the cheaper lithium-iron-phosphate (LFP) composition over nickel for domestic battery sales, which will restrain demand growth. However, producers are expected to continue producing nickel batteries for the US and Europe, where consumers prefer higher energy density batteries.

Finished demand is then forecast to grow at a slightly faster CAGR of 4.1% to 3,147kt by 2040. China’s manufacturing economy will mature and transition into a more consumption-based economy, which will eventually drive down demand growth rates. However, the sheer size of the Chinese market will continue to ensure its place as the global leader of demand.



The Battery Master

China is responsible for almost 80% of the world’s lithium-ion battery production, dominating the sector. There is a large focus on the mass production of batteries for the increase in domestic EVs demand.

Global EV sales were 6.6m 2021 and are forecast to climb to 10.5m by the end of 2022. Government-implemented EV subsidies were intended to be phased out in 2022, however they are still in effect. This has also spurred increased vehicle sales.

Contemporary Amperex Technology (CATL), the largest lithium-ion battery manufacturer in the world, has recently unveiled the Qilin Battery, a newly developed integrated battery with a record breaking 72% volume utilisation rate. The battery is capable of carrying up to 255Wh/kg with a ternary high-grade nickel composition. Plans are in place for its mass production in 2023.

This will generate a large upside for finished nickel demand. CATL has also joined hands with ANTAM and IBI to create a US$6bn integrated battery project in Indonesia. This includes everything from nickel mining, processing to recycling. Construction is to begin in late 2022 and will be completed by 2026.

The battery manufacturer will develop a US$5bn battery recycling plant with Hubei Yihua Chemical Industry to propagate a circular economy. Its production plant in Sichuan has also been certified in March to be a zero-carbon factory, with a 99.3% metals recovery rate from recycled waste streams.


Stainless is Flawless

On the other hand, China is also the largest producer of stainless-steel. As the country is able to produce from cheaply sourced lower-grade NPI supplies. The country imports almost 84% of its ferronickel from Indonesia for its stainless-steel industry, as most investment has been diverted to Indonesian nickel processing development.

Tsingshan Holding Group is one of the world’s largest stainless-steel producers. It controls its own supply chain by investing in Indonesian ferronickel production from mine to mill. Tsingshan has a total crude stainless-steel production capacity of 10Mt. Its domestic facilities are located in Fujian, Guangdong and Zhejian.

The company’s introduction of nickel pig iron (NPI) in 2008 has drastically altered the market. Chinese producers now tend to opt for the cheaper NPI over high-grade ferronickel. Tsingshan’s integrated RKEF-AOD design charges hot ferronickel directly into the stainless-steel furnace, which greatly reduces energy consumption and emissions of the process. It also has plans to construct a 2GW solar and wind farm to power its Indonesian operations.


Mined Nickel Demand

China has been overtaken by Indonesia as the largest source of mined demand as a result of the 2020 ore export ban. The continued development of processing capacity in Indonesia has offshored Chinese demand.

In the December quarter it is forecast to use 206kt of nickel contained in concentrates and ores. This will flow to an annual demand of 877kt in 2022, growing by 7.1%. This is driven by smelting and refining operations resuming production after pandemic related suspensions.

China’s mined demand is then forecast to decrease to 749kt by 2027. Chinese mined demand will continue to rely on imports due to dwindling domestic reserves. The proposed export tax on low-grade nickel products will propel full operation integration and continue to drive Indonesian mid to downstream processing capacity.

In the long term, mined nickel demand is forecast to be 1,140kt in 2040, growing at a CAGR of 3.3%. Increased process capacity is expected as production shifts towards higher-grade nickel products for the battery sector. The sulphate industry is also expected to boom following the EV sector. Demand coming from ferronickel will rely largely on Indonesian production.



Chinese mined nickel demand relies largely on imported supplies. In 2022, the country will have a projected mined demand of 877kt but is only forecast to produce 121kt of mined ore domestically. Meaning that it will be able to satisfy merely 14% of its own demand, with the rest relying on imports.

Approximately 90% of China’s current ore imports come from the Philippines, with 5.4% coming from New Caledonia. However, this has been inadequate in filling the gap left by previous Indonesian supply.

The largest mined demand in China comes from Jinchuan Group’s smelter and refinery in the Gansu province. Unlike other large-scale smelters within the country, its vertically integrated production relies less on imported ores, and instead processes feed from domestic mines (such as Longshou).

However, this will not be a sustainable method of operation in the longer-term due to the depletion of reserves and ore grade degradation. Class 1 nickel cathodes, powders and salts are produced. The company invested approximately US$260m in upgrading obsolete equipment to improve processing efficiency and emissions.