Surge in LME Nickel Stocks
In November, the London Metal Exchange (LME) recorded a 35% increase in Russian nickel stocks, reaching 11.1 thousand tonnes. This surge is part of a broader trend, with overall nickel stocks climbing by 14.2% to 43 thousand tonnes. Notably, Chinese and Australian nickel inventories are also on the rise, indicating a slowdown in global nickel demand.
Global Trends and Market Implications
The growth in nickel stocks across major producers and consumers, including China and Australia, suggests a cooling demand for the metal. Chinese nickel stocks doubled to 3,000 tonnes, while Australian stocks grew by 9% to 20.5 thousand tonnes. Despite these increases, global nickel stocks remain historically low.
Mikhail Borovikov of Nornickel points to a significant destocking trend across various metals, negatively impacting prices. However, with inventories reaching minimal levels, this destocking phase appears to be concluding.
Reduced Demand and Market Oversupply
Nornickel, a major nickel producer, has revised its global market surplus estimate for 2023 to 250,000 tonnes from 200,000 tonnes, reflecting a decrease in demand. The dip in demand is attributed to various factors, including the rise of nickel-free lithium-iron-phosphate batteries and a shift towards plug-in hybrids in China.
Fitch Ratings has adjusted its nickel price forecast for 2024, lowering it to $18,000 per tonne from the previous $19,000. This revision aligns with a reduction in demand from Chinese stainless steel producers and the economic downturn influencing the raw materials sector.
Concerns Over Profitability
Boris Krasnozhenov of Alfa Bank highlights that the current nickel price puts nearly a quarter of global nickel output at risk of unprofitability. With around 70% of nickel usage in the stainless steel industry, largely consumed in construction and machine-building, prolonged low prices could challenge the sustainability of nickel production.