By Andy Dwelling
LONDON, April 30 (Reuters) – The worldwide nickel market recorded a supply-demand surplus of 108,000 tonnes final yr and is on observe to report one other 45,000-tonne surplus this yr, the Worldwide Nickel Research Group (INSG) discovered.
Most analysts appear to agree.
Reuters’ quarterly ballot, out on Thursday, confirmed a median forecast that refined nickel provide will exceed demand by 31,000 tonnes this yr and 66,500 tonnes subsequent yr.
Such assessments feed right into a bearish value panorama, with the ballot producing a median London Steel Alternate (LME) money forecast of $16,904 per tonne this yr and $16,500 in 2022. LME three-month nickel CMNI3 is buying and selling round $17,615.
Extra steel, clearly seen within the type of the 262,044 tonnes of refined nickel sitting in LME warehouses, has damped a number of the market’s earlier bull flames.
However the INSG warns that “there’s a diploma of uncertainty” in its forecasts, particularly round Indonesia, the world’s largest producer.
MOVING TARGETS
Nickel utilization fell by 1% final yr however is predicted to roar again by 12% to 2.67 million tonnes this yr, the INSG stated after its newest twice-yearly assembly.
The steel’s demand profile is dominated by its utilization in chrome steel, whose world manufacturing slid by 2.5% final yr, the Worldwide Stainless Metal Discussion board stated.
Chinese language stainless manufacturing began rebounding strongly within the second half of final yr and the restoration is predicted to unfold to the remainder of the world this yr.
In the meantime, utilization in electrical car (EV) batteries is small by comparability however “will proceed to have a constructive influence on nickel utilization,” going ahead, the INSG stated.
Demand is just not nickel’s fast downside.
Fairly, it’s the energy of refined manufacturing progress, up 5% final yr, regardless of a drop in mined output, and is forecast to rise one other 9% this yr to 2.718 million tonnes.
Nevertheless, because the INSG flags, world manufacturing is a transferring goal, fairly actually as China’s nickel pig iron (NPI) sector migrates to Indonesia after the nation banned the export of unprocessed ore at the beginning of 2020.
This mass off-shoring train is obvious to see in China’s shifting nickel commerce flows.
Imports of nickel ore collapsed by 30% final yr as Indonesia lower off the export faucets and different suppliers, such because the Philippines, did not compensate for the loss. Imports of ferronickel, in contrast, surged by 80%. Indonesian NPI accounted for 79% of the three.44 million tonnes imported beneath this commerce class.
China’s NPI manufacturing is declining. Indonesia’s is rising.
The issue going through the INSG’s statistical committee and everybody else is that this dynamic is very fluid, each when it comes to pace and scale.
It might take a while for the method to search out its equilibrium and till it does, pinning down the nickel market’s supply-demand steadiness will stay difficult.
INDONESIAN PUZZLE
Indonesia can also be the supply of an excellent larger uncertainty clouding nickel’s prospects.
China’s Tsingshan Group, a self-proclaimed disruptor of each the chrome steel and nickel industries, poured a bucket of chilly water over the market’s EV goals in March, when it stated it meant to supply battery-grade materials from nickel matte.
This might successfully shut the processing hole between the form of nickel utilized by the chrome steel trade and that used for lithium-ion battery manufacturing.
The place Tsingshan is main, others are following because the Indonesian authorities tries to construct out an EV supplies provide chain from its considerable nickel assets.
Timelines to business manufacturing and prices are extremely unsure. So too is the carbon footprint of the expertise required to finish the ore-to-sulphate processing route, which is a giant potential downside for an enter right into a inexperienced product, resembling an electrical car.
The one certainty is that Indonesian mine manufacturing, which fell by 10% final yr after the export ban, is rising quick, up by 53% within the first two months of this yr, the most recent INSG month-to-month bulletin stated.
CLOUDY OUTLOOK
The nickel value hasn’t recovered from Tsingshan’s shock announcement. LME three-month steel was flying excessive above $20,000 per tonne in February however collapsed under the $16,000 degree in early March.
Even after a copper-inspired rally this week, nickel stays the under-performer of the LME base metals suite, up by 1.2% because the begin of January, in distinction to copper’s stellar 26% value good points.
The INSG’s forecast for a second yr of oversupply feeds right into a newly rising bear narrative that nickel’s utilization in electrical automobiles might not be the one-way increase guess it appeared even a couple of months in the past.
However there are lots of unanswered questions, together with essentially the most fundamental of how a lot Indonesian manufacturing develop and what type of the steel it should take.
The nation has launched into an enormous nickel processing experiment, which if profitable would fuse the nickel chemistry cut up between battery and chrome steel purposes. That in flip would undermine the bull argument that costs should rise to incentivise extra manufacturing of the “proper” kind of nickel.
The emphasis is on the phrase “if” as a result of there will probably be no decision of nickel’s competing narratives till the experiment begins producing tangible outcomes.
The large recognized unknown on the coronary heart of the nickel market stays. Certainly, it is the market’s defining function proper now.
Nickel market going through second yr of provide surplushttps://tmsnrt.rs/3gLc33okay
(Modifying by Barbara Lewis)
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