Nickel Prices Hit Near Three-Year Lows Amid Surging Indonesian Production
Indonesia's strategic move four years ago to ban exports of nickel ore has led to a significant influx of foreign investment, primarily from China, aimed at boosting domestic processing capabilities. This policy has catalyzed a 250% increase in Indonesia's nickel production since 2021, pushing nickel prices to hover near three-year lows. Currently, the three-month nickel contract is trading at $17,670 a tonne, marking an 8% increase since the year's start.
Nickel's role is crucial in various industries, including electric vehicle batteries, alloys, and even aerospace. However, 2023 saw nickel as the London Metal Exchange's poorest performer, with prices plummeting by 47%, making it the second-worst year for nickel price growth following the 2008 financial crisis, according to ING Think, ING's economic and financial analysis arm.
Australia’s Office of the Chief Economist noted a downward trajectory in nickel prices throughout 2023, from over $30,000 a tonne in January to an average of around $17,600 per tonne in the December quarter. This slump is primarily attributed to the supply surge from Indonesia, prompting BMI, a unit of Fitch Solutions, to adjust its 2024 price forecast to $18,000/tonne from $20,000 due to a burgeoning global production surplus.
The sharp increase in supply, especially from Indonesia and China, is anticipated to be a significant factor driving price declines. The global nickel market is expected to witness its third consecutive year of surplus supply, exacerbated by rising primary nickel output from Indonesia despite recent mine supply cuts.
The global economic landscape's subdued outlook, alongside tepid demand, is likely to restrain nickel price growth in 2024. According to BMI, the global nickel market is projected to see a surplus of 263,000 tonnes in 2024, slightly up from a 209,000 tonnes surplus in 2023. This scenario reflects the challenges facing the nickel sector, including production cuts and shutdowns worldwide, as highlighted by BHP Group's announcement regarding its nickel division's potential scaling back.
