Posted on 28 May 2024
The fundamentals of nickel have improved from the metal’s price crash last year to rebalance the near-term market, according to analysts at Macquarie Group.
The increasing production of high nickel stainless steel in China and Indonesia, a slowdown in the growth of Indonesian nickel pig iron, and over 300,000 t/y of nickel supply reductions have helped rebalance the markets, the analysts say.
Recent years saw a “significant under-reporting” of Chinese stainless steel production, leading Macquarie to raise its 2023 estimate for high-nickel 300-series grades to 19.9 million tonnes from 18.3m t. At the same time, nickel surplus has switched from Class 2 in 2023 to Class 1 due to an increase in Chinese Class 1 supply coupled with the decreasing use of Class 1 by the steel and battery sectors.
Outside Indonesia, production cuts reached more than 300,000 t/y in 2023, with a further 100,000 t/y of potential reductions anticipated this year, Kallanish notes from Macquarie’s latest report.
China and Indonesia continue to dominate world supply and demand. While stainless steel accounted for the highest nickel usage, batteries are now the second-largest nickel consumer.
“The battery market should recover this year after heavy destocking in the battery supply chain last year,” the analysts write. “This is despite some strong headwinds in the electric vehicle markets which has resulted in significant downward revisions in sales growth for full battery electric vehicles.”
“The overhang of Indonesian production and capacity additions remains a deadweight for nickel prices with Indonesia likely to reach 70-75% of global supply by 2028/29,” they add.
However, with a new government set to take office later this year in Indonesia, legislative uncertainties remain. Macquarie believes there’s a large potential for the new government to “significantly change some operating parameters.” This includes changes to ore licences, export taxes, and moratoriums on building new capacity, among others.
Source:Kallanish
