Posted on 05 Jul 2023
Nickel supply surplus over the next two years will keep nickel prices lower, according to the Australian government’s latest Resources and Energy quarterly report seen by Kallanish.
The LME nickel price, which is forecast to average about $23,000 a tonne in 2023, is expected to fall to $20,600/t in 2024 and $20,000/t in 2025.
This benchmark price has weakened in net terms since the March 2023 Resources and Energy Quarterly, as fears build of a hard landing in the world economy. The relatively “anaemic” recovery in the Chinese economy has been a factor in the price decline, the report suggests.
Nickel supply is expected to exceed the strong metal demand driven by Indonesian, and some Chinese, output growth. Surpluses are evident in Chinese markets, though Western markets remain tight.
The supply glut is almost wholly driven by Indonesian and Chinese Class II nickel products. Class I nickel markets remain tight, as indicated by further nickel outflows from LME warehouses.
That said, illiquidity in markets, following the Russian invasion of Ukraine, and historically low inventories will provide some support to nickel prices.
Meanwhile, a slow recovery in Chinese goods demand in the first half of 2023 has dampened global nickel demand. However, a stronger second half, combined with electric vehicle demand in the West, is forecast to see nickel usage rise by 9.3% in 2023.
Overall, nickel consumption is forecast to reach 3.6 million tonnes by 2025, representing an average annual growth of 5.3%. Mined nickel production is forecast to grow by 3.8% and 3.4% over 2024 and 2025 to reach 3.7m t, with Indonesian output expected to be responsible for four-fifths of this global uplift in production.
Australian mined nickel production is forecast to remain flat at 155,000 t in 2022–2023. Mine production is expected to improve over the outlook period, reaching 214,000 t in 2024–2025.
With prices coming off recent highs, Australian nickel export earnings are forecast to fall from AUD 4.5 billion ($3 billion) in 2022–2023 to AUD 4.2 billion in 2024–2025.
Export volumes are forecast to increase from 154,000 t in 2022–2023 to 174,000 t in 2023–2024 and 188,000 t in 2024–2025, estimated growths of 13%.
Source:Kallanish
