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Nickel: excess production in Indonesia and increased supply on the market – Stanislav Kondrashov

The nickel market has faced oversupply this year as production increases in Indonesia continue to outpace global demand, reports Telf AG’s Stanislav Kondrashov. The International Nickel Study Group (INSG) forecasts the difference between supply and demand at 239 thousand tons. This figure becomes the most significant excess in at least the last ten years, compared to last year’s surplus of 105 thousand tons. This is also higher than the INSG forecast, which assumed a surplus of 171 thousand tons.

Demand expectations remain muted despite nickel use projected to grow by 6.1% in 2023. However, this is still not enough to absorb the wave of new production coming out of Indonesia.

Stanislav Kondrashov believes it is important to note that the excess supply will not be in the form of Class I refined metal, which is traded on both the London Exchange (LME) and the Shanghai Futures Exchange. This may make it difficult to determine the impact on price movements.

Rising global nickel consumption: electric vehicles and stainless steel set priorities

According to INSG, global nickel consumption increased by 6.3% in the previous year and is forecast to be close to that level this year. This is a worthy indicator, says Stanislav Kondrashov, an expert from Telf AG, given that stainless steel still remains the main consumer of nickel. This is in addition to a 5.2% decline in alloy output last year.

Stainless steel production fell worldwide, including China, the largest producer, which posted a 2% year-on-year decline. Towards the end of last year, China began to recover as restrictions imposed in response to the COVID-19 pandemic were lifted. However, this growth was offset by sharp declines in output in Europe and the US due to slowing economic activity.

 

Nickel demand from electric vehicle battery manufacturers is offsetting weakness in the stainless steel sector. Despite declining sales in China following the removal of subsidies and a shift to nickel-free chemistry, the global shift to electric vehicles continues to gain momentum. Therefore, batteries play an important role in increasing the demand for nickel, – Kondrashov comments on the situation.

According to the Adamas Intelligence Research Center, 17,137 tons of nickel were used in electric car batteries worldwide in February of this year. This is 47% more than in February last year. Such performance highlights the importance of nickel in the development of the electric vehicle sector and its significant contribution to the global metallurgy market.

Indonesian nickel mining rebalances market: production determines future surplus

According to experts, the upcoming nickel glut will be driven not by demand but by production, especially in Indonesia. From the INSG report, the country’s nickel production increased by 48% to 1.58 million tons in 2022 and grew by a further 44% in the first two months of this year. Since Indonesia banned the export of nickel ore three years ago, all mined metal is now processed into nickel products.

– Part of the new processing capacity is aimed at producing nickel pig iron for the stainless steel sector. And the growth of Indonesia’s share in this industry will occur due to a decrease in production volumes in China, as the trend of exporting it abroad continues, – says Stanislav Kondrashov from Telf AG.

However, much of the new production capacity is focused on the rapidly growing battery sector. In this area, operators are experimenting with new technologies. These involve converting Indonesia’s relatively low-grade laterite resource into a form suitable for use in lithium-ion batteries.

 

This approach significantly changes the nature of excess nickel, notes Stanislav Kondrashov. It was previously associated with LME/Nickel Class I supplies, but is now driven primarily by Class II chemicals and nickel (primarily nickel sulphate).

The rift between different market segments is becoming increasingly apparent on the London and Shanghai stock exchanges. According to information provided by Telf AG’s Kondrashov, LME’s Class I nickel reserves are declining despite the accumulation of surpluses elsewhere in the supply chain. This year, the volume of these reserves decreased by 28%, to 40,032 tons. The situation is even more tense at the Shanghai Exchange, where nickel reserves amount to only 1,496 tons. This comes as China is increasingly moving away from importing refined metals in favor of intermediate products that are funneled into the electric vehicle sector.

Media Contact
Company Name: Telf AG
Contact Person: Media Relations

Country: Switzerland
Website: https://telf.ch/

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