Indonesian Nickel Miners Brace for Prolonged Price Slump
Indonesia's nickel mining industry is gearing up for a challenging year in 2024, as global oversupply persists amid a decline in demand. Despite worldwide announcements of production cuts and mine closures, the expected boost in nickel prices has yet to materialize, leaving analysts skeptical about a swift recovery.
Amidst the uncertain market conditions, Bayu Aji, Head of Communications at Vale Indonesia, emphasized the company's commitment to maintaining its production target at 70,800 tonnes. Aji highlighted the focus on improving operational efficiency to navigate the prolonged slump in nickel prices, reflecting a strategy adopted by several players in the sector.
Nickel faced significant challenges in 2023, witnessing a 40% decline in value on both the London Metal Exchange (LME) and the Shanghai Futures Exchange (SHFE), making it the worst performer among base metals. A 2024 preview by Fastmarkets noted that despite bearish sentiment, market participants anticipate a more modest downward movement compared to 2023.
The persistently low nickel prices have reverberated across the global mining industry. Recent closures include Wyloo Metals in Western Australia and BHP's nickel processing plant, reflecting the ongoing struggle faced by industry players. These closures mark the fourth in January alone, indicating the significant challenges brought on by the 2023 price plunge.
Felix Darmawan, a commodity analyst at PT Panin Sekuritas, expressed hope that announced production cuts might eventually have a positive impact on nickel prices. He pointed to China's economic policies and increased liquidity as potential contributors to improving sentiments in the world's seventh-largest nickel producer.
Data from the International Nickel Study Group revealed an 18th consecutive monthly surplus in the global nickel market in October 2023, with a cumulative surplus of 193,200 tonnes in the first 10 months of 2023. Robertus Hardy, Research Head at Mirae Asset Sekuritas, expects the market to witness an annual surplus in 2024, signaling continued pressure on global nickel prices. He anticipates that nickel prices are unlikely to reach their 2022 peak and emphasizes that market dynamics and the production ambitions of key nickel-producing countries, such as Indonesia and the Philippines, are expected to exert a negative impact on prices.
