INSG forecasts nickel surplus at around 109,000 t for CY'24; LME prices rebound

The International Nickel Study Group (INSG) forecasted a surplus of 109,000 tonnes (t) for 2024, following surpluses of 98,000 and 163,000 t in 2022 and 2023, respectively.

The global economy is expected to maintain its growth trajectory in 2024, similar to 2023, with a gradual decline in global inflation projected. According to the World Stainless Association, stainless steel melt shop production saw a y-o-y increase of 4.6% in 2023, reaching 58.4 million tonnes (mnt).

INSG anticipates further expansion in the stainless steel sector for 2024, particularly in China and Indonesia. However, the growth rate of nickel utilisation in electric vehicle (EV) batteries has been slower than expected due to subsidy removal, competition from alternative battery types like lithium iron phosphate, and a recent consumer preference for plug-in hybrid EVs over battery EVs.

In Indonesia, various nickel products, including nickel pig iron (NPI), mixed hydroxide precipitate (MHP) from high-pressure acid leaching (HPAL) plants, nickel matte converted from NPI, nickel cathode, and nickel sulfate, are expected to see an increased production. In China, NPI production is projected to decrease in 2024, while nickel cathode and nickel sulfate production are forecasted to rise, leading to an overall output increase.

Elsewhere, due to profitability concerns, several production facilities have been either temporarily closed, scaled down, or are considering these options for the future.

World primary nickel production reached 3.060 mnt in 2022 and increased to 3.356 mnt in 2023. Projections suggest it will further rise to 3.554 mnt in 2024. Similarly, world primary nickel usage was 2.963 mnt in 2022, rising to 3.193 mnt in 2023, with an expected increase to 3.445 mnt in 2024. As a result, implicit market balances indicate surpluses of 98,000 t in 2022, 163,000 t in 2023, and 109,000 t in 2024.

LME nickel trend

Nickel has experienced a notable recovery this month, reclaiming some of its losses from the extensive price downturn in 2023. The London Metal Exchange's (LME's) three-month nickel reached $19,775/t, its highest level since September last year. Currently trading at $19,000/t levels, nickel has surged by 15% since the beginning of the year, ranking as the third strongest performer after tin and copper.

Meanwhile, stocks in LME-registered warehouses showed the rise in stocks by 57% to 72,582 t during January to April 2024 compared to 46,242 t in the corresponding period last year (CPLY).

Improved sentiment stemmed from the challenges faced by nickel producers due to low prices, resulting in closures or capacity reductions. BHP Group, evaluating its Western Australian operations, highlighted that 30% of Australian mine capacity had ceased operations, with another 30% encountering difficulties due to tight margins.

Despite concerns over market disruption from Russian metal sanctions, the LME has accelerated the listing of new Chinese producers, mitigating potential losses from Russian production. Investment funds have also played a significant role in driving the recent price rally, with an increase in net long positions as short positions decreased.