Navigating Nickel

However, 2023 posed fresh challenges to the industry, marked by volatile pricing dynamics, oversupply concerns, and uncertainties surrounding demand from China’s struggling property sector. Under these challenging conditions, nickel emerged as the weakest performer among LME base metals in 2023, with prices down by around 45% according to ING.

In response to this turbulent market environment, nickel producers – from the C-Suite to process professionals and plant superintendents – should focus on what they can most readily control: operational excellence. While financial derivatives offer a hedging option to navigate fluctuating supply and demand dynamics, operational excellence stands out as the single most important tool at the disposal of nickel producers for gaining a competitive advantage and ensuring sustained business success amidst persistent market volatility.

Nickel overview

Nickel, the fifth most abundant element on Earth, plays a key role in various industries ranging from stainless steel production to electric vehicle (EV) lithium-ion batteries. Although reserves available for economically viable mining are limited, the current land resource base is estimated to endure for over 100 years at the present mining rate, according to the International Nickel Study Group (INSG). Geographically, Asia dominates the nickel market, with China alone representing nearly 60% of the world demand in 2020 (up from 39% in 2010).

The primary application for new nickel remains stainless steel production, with this market experiencing a growth rate of approximately 5.8% per annum, driven by demand across the automotive, consumer goods, and construction industries. However, nickel’s usage extends to alloyed steels, high nickel alloys, castings, electro-plating, catalysts, and chemicals.

What changed in 2023?

Supply and demand dynamics

The demand for nickel witnessed substantial growth in 2023 and is projected to further increase by 9% in 2024. However, this surge in demand has also been met with a simultaneous rise in production, presenting a challenge for balancing the market. Consequently, the global nickel market experienced a surplus of 223 000 t in 2023, over double the 104 000 t surplus in 2022. This surplus is particularly noteworthy given that the total global nickel output reached approximately 3.42 million t in 2023. Projections from the INSG indicate that this surplus is poised to expand to 239 000 t in 2024, marking the third consecutive year of excess supply.

The surge in supply stands out as one of the key drivers for nickel’s relative underperformance in 2023, which can be mainly attributed to class II and nickel chemicals – particularly nickel sulfate, rather than the historical association with LME deliverable/class I nickel. Indonesia has played a pivotal role in this supply surge, particularly in nickel pig iron (NPI) and nickel mesh. To position itself as a significant raw materials supplier to EV battery manufacturers, Indonesia has substantially increased its mined nickel production in 2023. Holding the largest nickel reserves, Indonesia produced an estimated 1.6 million t in 2023, constituting nearly half of the global nickel production.

Read the article online at: https://www.globalminingreview.com/finance-business/25032024/navigating-nickel/