Global Nickel Industry Confronts Existential Crisis Amid Indonesia’s Surge

The global nickel industry is grappling with a dire predicament as the vast and inexpensive nickel supply from Indonesia overshadows the market. This situation has rendered about half of the world's nickel operations unprofitable at current prices. Industry leaders have expressed concerns over the slim chances of a market recovery, highlighting the existential threat faced by nickel mines from Australia to New Caledonia during a time when securing strategic metals for a green economy is paramount.

Indonesia, powered largely by coal, dominates the nickel market, contributing to over half of the global supply with projections to cover three-quarters by 2030. This dominance poses a significant structural challenge to the industry, according to Anglo American Plc's CEO, Duncan Wanblad, despite the growing demand for nickel in electric vehicle production.

The market categorizes nickel into two types: the lower-grade for stainless steel and the higher-grade for batteries. Indonesia's expansion in lower-grade nickel production has not only created a surplus but also allowed for technological innovations that refine this surplus into higher-quality products suitable for batteries.

This shift represents a structural transformation in the nickel industry, challenging traditional market models and forecasts. Major mining companies, including BHP Group, which has historically profited immensely from other resources, face substantial losses in their nickel ventures. BHP's CEO, Mike Henry, acknowledged the necessity of deciding the future of its Australian nickel business amidst a market surplus expected to persist until at least 2030.

With the industry adjusting to these new dynamics, production cutbacks and delayed projects have reduced the market by approximately 250,000 tons per year, equivalent to 7% of total production. The combination of China's economic slowdown, fluctuating electric vehicle popularity, and a 45% drop in nickel prices over the last year has intensified the pressure on nickel producers. At current prices around US$17,000 per ton, a significant portion of production becomes unprofitable, with the figure soaring at lower price points.

Amidst these challenges, industry leaders are exploring cost-cutting measures and strategic adjustments to navigate the Indonesian-dominated market landscape.