Nickel prices on the London Metal Exchange (LME) have been steadily declining due to a combination of weak domestic demand in China and the possibility of more monetary policy tightening in the US.
The benchmark LME nickel price was at $30,325/t on February 1. The contract has decreased by 22.5 percent, closing at $23,475/t on March 9. The key metal, which is used in electric vehicles (EVs), has continued to be the basic metals sector's worst-performing contract commodity on the LME thus far in 2023, with a decline of more than 20 percent.
The white metal is now priced at $21,318 a tonne on the LME.
According to S&P Global Commodity Insights' monthly Nickel Commodity Briefing Service (CBS) report, LME nickel prices began to decline in May as a result of disappointing trade data from China, the world's largest consumer of industrial metals. This data further demonstrated that China's metals demand has fallen short of market expectations since the country's relaxation of COVID-19 restrictions in December 2022.
Price pattern, output surpasses demand
With output exceeding demand and concerns about a global economic slowdown pushing prices up against the possibility of additional monetary tightening by major central banks, the outlook remains gloomy. The lowest price this year was $20,934 per metric tonne for the LME 3-month nickel closing price on May 18. Prices for nickel shot up above $100,000 per tonne in March of last year when a Hong Kong trader went short, causing the LME to halt trading in the metal for several weeks.
According to the International Nickel Study Group, increased output from Indonesia and the Philippines has resulted in the greatest demand-supply surplus in at least ten years on the nickel market.
Market for nickel expected to be in oversupply until at least 2027: Macquarie
The global nickel market is predicted to have a surplus every year through at least 2027 due to Indonesia's rapid increase in output, according to a Macquarie analyst.
According to Jim Lennon, an analyst at Macquarie, the nickel market may have a surplus of 142,000 tonnes this year, up from a surplus of 111,000 tonnes in 2022, the majority of supply came from Indonesia.
Lennon at the SMM Indonesia Nickel-Cobalt conference in Jakarta said, Reuters reported on May 31, that the surplus is anticipated to climb to 187,000 tonnes in 2026 before decreasing to 40,000 tonnes in 2027, with the majority of the supply increase in lower-grade "Class 2" nickel.
According to INGS research director Ricardo Ferreira, the primary nickel surplus this year was anticipated by the International Nickel Study Group (INSG) to be 293,300 tonnes, up from a surplus of 105,200 tonnes in 2022.
According to Macquarie's Lennon, the demand for nickel from the battery industry is expected to increase by almost four times by 2030, to 1.69 million tonnes, from 484,000 tonnes in 2022.
Nickel prices projected to decline
According to industry watchers, global nickel prices are likely to fall over the coming years as top producer Indonesia increases supplies and production costs come down, according to a May 19 report in Reuters.
Ellie Wang, a Shanghai-based analyst at HSBC, predicts that the benchmark three-month nickel contract on the London Metal Exchange would drop below $20,000 per tonne in 2024 as a result of output growth outpacing demand.
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