Global Nickel Prices Hit Three-Year Low: Impact on the Industry and Nornickel
Nickel prices on the global market have plummeted to their lowest levels since November 2020, dipping below $16,000 per ton, according to the London Metal Exchange (LME). The decline, which saw prices fall to $15,600 per ton before stabilizing around $16,025 per ton, has led to significant operational losses across half of the industry's enterprises, with Nornickel experiencing notable revenue decreases.
This price downturn marks a continuation of the downward trend that began in January last year, following a period of growth sparked by fears of supply disruptions from Russia amid geopolitical tensions. Despite hitting an all-time high of $48,078 per ton in early March 2022, nickel prices have since faced a steady decline, exacerbated by factors including the coronavirus outbreak in China and stable nickel supplies from Russia.
Analysts attribute the current price dip primarily to a supply-demand imbalance, with Indonesia's production surge playing a key role. Indonesia, the world's largest nickel producer, saw its production increase by 48% in 2022, accounting for about half of global production. This growth has outpaced global demand, particularly with a slower-than-expected demand increase in China, which accounts for 60% of global nickel imports.
The decline in nickel prices is further limited by production costs, with approximately 50% of the industry's enterprises operating at a loss at current prices. Industry experts warn that if prices continue to fall, a significant portion of nickel producers worldwide could become unprofitable, potentially leading to a reduction in global production.
Despite the bleak outlook, some analysts predict a recovery in nickel prices in the coming months, with estimates averaging around $19,000 per ton in 2024. Russia, as one of the largest nickel suppliers globally, is closely watching these developments, with Nornickel adjusting its production forecasts in response to the challenging market conditions.
Nornickel, which accounts for about 20% of its revenue from nickel sales, has reported a significant impact on its financial performance due to the declining nickel prices. The company's revenue, EBITDA, and net profit have all experienced downturns in the first half of 2023, highlighting the broader challenges faced by the nickel industry amidst fluctuating prices and geopolitical tensions.
