Top nickel miner sees smaller market surplus amid robust demand and supply hurdles
Nornickel, the world's largest producer of Class I nickel, sees a smaller global nickel market surplus due to growing demand for nickel in the smelting and electric vehicle sectors, according to the market overview published on the company’s website.
The miner expects 100,000 tons of surplus in 2024 and 2025. Although the surplus is smaller than the previously anticipated 190,000 tons for 2024, it still suggests an oversupply, predominantly of low-grade nickel.
Nornickel's analysts reiterated that the surplus is due to the expected increase in nickel production capacities in Indonesia and the higher supply of nickel metal and chemical compounds. However, they caution that several factors could disrupt this balance. Potential delays in Indonesian mining permits, lower nickel content in nickel pig iron (NPI), and possible bans on new NPI projects pose significant risks. Additionally, a potential decrease in the supply of low-grade nickel forms, such as ferronickel and BFN, in China could further affect market dynamics.
Since the start of the year, nickel prices on the London Metal Exchange (LME) have risen sharply from $16,000 to over $20,000 per ton. This surge is driven by several factors, including the suspension of operations by high-cost producers in Australia and New Caledonia, delays in Indonesian mining permits, and higher than expected Chinese consumption. Consequently, LME nickel price is up 25%.
While the current price environment is more favorable for producers, with over 90% now achieving positive production costs, the risk of production constraints remains, Nornickel said. Should demand continue to grow steadily, these constraints could push prices even higher.
