Asian Nickel Production Climbs Despite Australian Mine Closures

According to an October 23 report, despite the ongoing closure of nickel mines in Australia, raw nickel production in the Asian market has continued to rise into the fourth quarter of 2024, leading to weak pricing. Declining sales of power batteries in China and subdued demand for stainless steel have further contributed to a bearish outlook for nickel prices.

Several high-cost nickel mines in Australia have reduced production throughout 2024 due to low prices. Notable closures include First Quantum Minerals' Ravensthorpe project, which halted operations on May 1, and Wyloo's Kambalda mine, which went into care and maintenance on May 31. The latest closure came with BHP Billiton's Nickel West plant suspending operations on October 1. According to S&P Global Commodity Insights, this partial shutdown is expected to reduce global nickel mine production to 140,000 tonnes in 2024, marking a year-on-year decline of 31,000 tonnes, or 18.1%.

Throughout the third quarter, the London Metal Exchange (LME) three-month nickel price remained below $20,000 per tonne.

Despite production cuts in Australia, nickel supply from Indonesia, China, and the Philippines is expected to fill the gap. S&P Global Commodity Insights suggests that Indonesia is rapidly increasing production and could account for 44% of the global market share by 2027, maintaining its position as the leading nickel producer. In the third quarter, nickel production in Indonesia and the Philippines rose by 99,000 tonnes and 23,000 tonnes, respectively, representing quarterly increases of 18.9% and 18.5%. China's nickel production, meanwhile, remained stable at 30,000 tonnes, with a slight quarterly increase of 3.44%. Overall, raw nickel production in Asia during the third quarter increased by 220,000 tonnes compared to the previous quarter, reaching 730,000 tonnes.

This surge in nickel production in Asia has buffered the impact of mine closures in Australia and kept prices relatively stable in the third quarter, according to Jason Sappor, a senior metals and mining analyst at Commodity Insights. He also noted that "the continued inflow of supply into LME warehouses from major nickel producers like Indonesia and China, along with a global oversupply, is likely to prevent further price appreciation in the near term."

Weak demand for power batteries in China has impacted the market for nickel sulfate, a key raw material for NMC batteries. Fluctuations in nickel ore prices have significantly affected the production costs and supply dynamics of nickel sulfate. During the third quarter, nickel sulfate prices ranged from RMB 26,300 to 27,500 per tonne ($3,686-$3,874 per tonne), reflecting weak demand and cautious buying. Spot trading remained limited, with minimal price volatility, partly influenced by the holiday period around China's National Day. Industry insiders reported a pessimistic short-term outlook, with anticipated declines in orders for the fourth quarter.

Nickel market dynamics are also closely tied to stainless steel demand, which significantly influences nickel pig iron (NPI) prices. During the third quarter, NPI prices initially traded within a narrow range of $117-$117.5 per tonne before peaking at $124 per tonne on August 12. However, weak stainless steel demand in China led to a gradual decline in NPI prices by September, with continued pressure on upstream producers struggling to sell stainless steel at profitable prices.