Navigating the Complexities of the Global Nickel Market

The global nickel market presents a complex scenario: production is on the rise, consumption is growing, yet an overall surplus of nickel is forecasted. This situation presents a paradox, suggesting both an abundance and scarcity of nickel in the market.

Stainless Steel's Influence on Nickel Market Dynamics

The International Nickel Study Group's projections indicate a notable increase in global nickel production, expected to grow by 11.7% to 3.417 million tons by the end of this year, up from 3.06 million tons in 2022. Looking ahead to 2024, primary nickel smelting is anticipated to rise by 8.7% to 3.713 million tons.

Concurrently, global primary nickel consumption is also on an upward trend. In 2023, it's forecasted to reach 3.195 million tons, an increase of at least 8% from the 2.957 million tons in 2022. The growth trajectory continues into 2024, with an expected 17.5% increase to 3.474 million tons.

Despite these increases in both production and consumption, the nickel market is projected to remain in surplus. The surplus in the last year amounted to 104 thousand tons, with this year's surplus estimated at 223 thousand tons and next year's at 239 thousand tons. A key factor in this surplus is the decline in global stainless steel production. The World Stainless Association reported a 0.9% decrease in stainless steel production to 26.7 million tons in the first half of 2023 compared to the same period in 2022. However, the International Nickel Study Group expects a rebound in stainless steel output by the end of 2023, continuing into 2024.

Diverse Perspectives and the Indonesian Factor

The perspective from Sumitomo Metal Mining, a prominent Japanese metallurgical corporation, offers a contrast. They predict a global nickel surplus of 36 thousand tons for 2024, slightly higher than the expected surplus of 24 thousand tons at the end of the current year. According to their analysis, nickel demand in 2024 could increase by 8.5% from the 2023 levels to 3.35 million tons, while the supply is projected to expand by 8.9% to 3.39 million tons.

A significant aspect of Sumitomo Metal Mining's forecast is the growth of metal production in Indonesia, which is expected to rise by 10.3% to 1.27 million tons. However, a key nuance in this forecast is that Indonesia primarily produces nickel pig iron, predominantly used for common grades of stainless steel, rather than pure nickel. This form of nickel is not suitable for the production of heat-resistant nickel alloys for aircraft engine parts, nor is it efficient for conversion into nickel sulfate, a key component in lithium-ion batteries for electric vehicles. Additionally, nickel pig iron's inconsistent nickel content makes it unsuitable for precision grades of stainless steel used in chemical engineering and other industries.

Factors Driving Market Growth and Potential Price Increases

The correctness of these forecasts by the International Nickel Study Group and Sumitomo Metal Mining is reflected in the current nickel prices at the London Metal Exchange. Prices currently hover between 18.5 and 18.6 thousand dollars per ton, a significant decrease from the 31.3-31.5 thousand dollars per ton in January 2023. Various factors are subtly shaping the potential for nickel price increases:

1. China's stainless steel production witnessed a significant uptick in the first half of this year, increasing by 8.2% to nearly 17.6 million tons. The production of 300-series stainless steel, which contains nickel, saw an even greater increase of 11.1% to 8.9 million tons. The consumption of stainless steel in China also expanded by 5.7% to 14.7 million tons. These figures indicate a revitalization of the Chinese economy and a corresponding rise in demand for stainless steel.
2. Global stainless steel output is forecasted to reach 60 million tons by the end of 2023, up from 55.3 million tons in the previous year. China and Indonesia are expected to be the primary contributors to this increase in smelting, but other countries like India, Japan, and Taiwan are also poised to show significant growth. The demand for stainless steel is anticipated to rise, particularly in China and India, alongside other Asian countries.
3. The French nickel industry, with rich deposits in New Caledonia, is facing severe challenges. Major producers like Société Le Nickel and Koniambo Nickel are losing ground to Indonesian and Chinese competitors due to high electricity costs and technological problems. They are also heavily reliant on government support. This situation could lead to a substantial reduction in French nickel production by the end