LME's nickel prices crash by over 40% y-o-y in Jan'24 amid increase in supply

Nickel prices on the London Metal Exchange (LME) have recorded a significant 43% y-o-y decline, falling to $16,274/tonne (t) in January 2024 from $28,498/t in January 2023. This drop is attributed to an increased supply of nickel from Indonesia coupled with sluggish demand.

In parallel, y-o-y comparisons reveal a 29% rise in inventories stored in LME warehouses, growing from 52,518 t in January 2023 to 67,753 t in January 2024.

As a response to market challenges, several companies have taken defensive measures, with Wyloo Metals announcing mine closures and BHP Group Ltd. partially shutting down a processing plant, particularly impacting the Australian nickel sector. Major producers like Glencore, BHP, and First Quantum Minerals have also implemented precautionary actions. Glencore, for instance, halted funding for its Koniambo nickel mine in New Caledonia.

The nickel market imbalance has prompted companies to reassess their operations, potentially posing risks to new projects outside of Indonesia. The situation escalated in September 2023 when Glencore decided to freeze funding for the Koniambo mine and First Quantum Minerals temporarily suspended operations at the Ravensthorpe mine.

Amid these challenges, the nickel market's inherent volatility remains evident, with potential unforeseen price spikes necessitating vigilance from market participants. Nickel, known for its susceptibility to fluctuations, experiences distinct market dynamics, where favorable prices stimulate increased recycling activity, while declining prices tend to suppress nickel recycling.