According to the International Nickel Study Group, global nickel production is up 22% in January compared to the same time last year. That’s despite a slight month-over-month dip from December. Indonesia, the world’s number one production, has seen output surge more than 41% year-on-year in January. Unfortunately for prices, while production has been moving upwards, demand has been more modest. In fact, according to the data, refined nickel demand actually fell 5% in January and showed only a modest 2% gain compared to last year. BMO Capital Markets estimates that puts the annual demand around 2.8 million tonnes leaving the market with a surplus of roughly 255,000 tonnes.
Oversupply means lower prices and so nickel has dropped 28% since the start of the year. In another sign of a sluggish spot market, the discount between the LME’s cash nickel contract and the three-month forward has widened to $362 a tonne. That’s the biggest gap since 2007, and it suggests weak short-term demand and plenty of supply.
As we’ve seen, the nickel market can turn fast, however, at this point in time (as reported by mining.com), market watchers at Project Blue suggest that once the LME restarts its Asian trading hours prices will start to reflect the real fundamentals of the market and there will be a further price correction. Glencore also weighed in with some insights in its annual report. With so much non-LME grade nickel floating around, producers are adapting. More and more of it is being converted into nickel matte and nickel sulfate—both crucial materials for EV batteries and eligible for LME-grade production.
Prices do fluctuate but one thing does remain true for nickel. The EV sector continues to experience very strong growth and that means a lot of batteries need to get made and a lot of nickel will be needed.
Anthony Milewski
Chairman, Nickel 28 Capital
