As nickel prices continue to teeter just above $US20,000 per tonne, can we expect a resurgence from the commodity in 2023?
Three-month nickel on the London Metal Exchange (LME) closed at $US20,804 ($31,223) per tonne on Friday as the nickel market is affected by the global economic slowdown and surplus supplies.
According to BMI – a unit of Fitch Solutions – nickel averaged $US24,450 per tonne up until June 27, but the commodity analyst doesn’t expect the base metal to return to such heights, reducing its 2023 average price forecast from $US26,500 per tonne to $US23,500 per tonne.
“Prices have been on a steady downward trend since January 2023, falling to the lowest level seen since September 2022 of $US20,305 per tonne on June 26, down 34.7 per cent from the year-to-date high of $US31,118 per tonne,” BMI said.
BMI said there has been excess Class 2 nickel production entering the market, with Indonesia and China the culprits.
In the first three months of 2023, BMI observed refined nickel production in Indonesia increase 18.5 per cent year-on-year (yoy) from 255,700 tonnes to 302,900 tonnes. This comes as the country increases investment in its downstream nickel industry following a ban of nickel ore imports.
China also increased its yoy nickel production by 27.7 per cent to 212,000 tonnes across the first three months of 2023 as it boosts domestic nickel production to reduce reliance on exports.
Increased production has also coincided with reduced demand.
“Nickel prices face additional pressure as global stainless steel production sees flat growth in 2023,” BMI said. “According to the International Nickel Study Group (INSG), the stainless-steel industry accounts for approximately 63 per cent of total global nickel demand.
“In 2022, the World Stainless Association saw global stainless-steel production decline by 5.2 per cent yoy to 55.3 million tonnes and expects global production to remain stagnant over 2023.”
Despite the headwinds, BMI said tight LME nickel inventories and a weakening US dollar would prevent the commodity from collapsing to pre-pandemic levels.
Nickel experienced a downturn in the years leading up to COVID-19, with the base metal unable to breach $US15,000 per tonne between February 2015 and May 2018. Nickel only penetrated $US20,000 per tonne in September 2021.
BMI also expects nickel to benefit from the electric vehicle (EV) movement.
“We see some upside from a very strong long-term demand outlook for nickel due to its role in EV manufacturing, which will support prices to some degree in the short term,” BMI said.
“Electric vehicles require 39.9kg of nickel relative to the 0kg needed in conventional cars, presenting significant upside to nickel demand as the green energy transition accelerates.”
BMI’s long-term outlook sees nickel prices averaging $US26,500 per tonne in 2027.
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