TRADE REVIEW: Surplus nickel output, weak demand to impact Asian market in Q4

This report is part of the S&P Global Commodity Insights’ Metals Trade Review series, where we dig through datasets and digest some of the key trends in iron ore , metallurgical coal , copper , alumina, cobalt, lithium , nickel and steel and scrap . We also explore what the next few months could bring, from supply and demand shifts to new arbitrages, and to quality spread fluctuations.

The Asian nickel market continues to see increased primary nickel production moving into the fourth quarter of 2024, contributing to weakness in nickel prices, despite waves of nickel mine closures in Australia. Lower power battery sales and weak stainless steel demand in China are further exacerbating the bearish outlook.

Australian mine closures in Q3
Depressed nickel prices have forced several high-cost mines in Australia to curtail output in 2024.

Notable closures include First Quantum Minerals’ Ravensthorpe operation, which ceased production on May 1, and Wyloo’s Kambalda mines, which entered care and maintenance on May 31. The latest closure was BHP’s Nickel West facility which was suspended on Oct. 1.

These closures are expected to reduce global mined nickel production to 140,000 mt in 2024, down 31,000 mt or 18.1% year on year, according to S&P Global Commodity Insights data.

Throughout the third quarter, the London Metal Exchange or LME’s 3M nickel price remained below $20,000/mt.

Asian nickel prices rangebound on rising supply
In contrast, an influx of low-cost nickel supplies from Indonesia, China and the Philippines is anticipated to fill the gap left by Australian cutbacks, sources said. Indonesia is rapidly ramping up production and is expected to make up 44% of global market share by 2027, remaining the world’s largest producer of the metal, Commodity Insights data showed.

Mined nickel production from Indonesia and the Philippines in Q3 rose 99,000 mt and 23,000 mt, respectively, up 18.9% and 18.5% from the previous quarter. China’s production remained stable at 30,000 mt, reflecting a modest 3.44% rise on the quarter. Overall, Q3 primary nickel production in Asia rose by 22,000 mt quarter on quarter, reaching at 730,000 mt, the data showed.

This surge in Asian nickel production has buffered the impact of Australian mine closures, keeping prices relatively rangebound during Q3.

“We expect the continuous inflow of supply into LME warehouses from top primary nickel producers, Indonesia and China, and the prolonged global market oversupply to continue to subdue further price gains in LME nickel prices in the near term,” said Jason Sappor, metals and mining research senior analyst at Commodity Insights.

Although Indonesian nickel production is expected to contribute to the majority of global nickel supply in 2024, the country faced rainy seasons during the first two quarters, which dampened mining activities. In response to the drop in onshore nickel ore mining, Indonesia increased its imports of nickel ores from the Philippines to sustain its primary nickel production, sources said.

Indonesia’s nickel ore imports in July and August totaled 3.41 million mt, more than double the total imported in Q2 at 1.67 million mt, according to data from Badan Pusat Statistik Indonesia.

Platts, part of Commodity Insights, assessed high-grade nickel ore with 1.6% nickel content at $60/wmt CIF China on Oct. 21, up $0.1/wmt on the week, while low-grade nickel ore with 1.3% nickel content was assessed at $39/wmt, up $0.5/wmt over the same period.

Power batteries sales impact nickel sulfate
Downstream, the volatility in nickel ore prices significantly influences the production costs and supply dynamics for nickel sulfate, a crucial feedstock in NMC battery production. Prices of nickel sulfate also remained rangebound between Yuan 26,300-27,500/mt ($3,686-$3,874/mt) throughout Q3, according to Commodity Insights data, reflecting weakened demand and cautious buying behavior.

Platts assessed spot battery-grade nickel sulfate with a minimum 22% nickel content and maximum 100 ppb magnetic material at Yuan 27,000/mt ($3,804/mt) DDP China Oct. 21, up Yuan 100/mt since the beginning of Q3.

Market sources, however, reported limited spot trades and minimal price movement due to weak downstream demand and extended holidays in China for the National Day celebrations.

Market participants were bearish about the near-term outlook for nickel sulfate in the battery sector. A consumer expressed concerns about declining demand, while a precursor maker agreed that Q4 orders do not look promising, predicting either a decline after September or a slight increase in that month, followed by sharp drops in November and December.

The decline in demand aligns with trends in China’s power battery sales, a key indicator of battery metals demand.

In August, power battery sales reached 68.4 GWh, reflecting a growth slowness of 1.7% month on month and 10% quarter on quarter, according to data from the China Automotive Battery Innovation Alliance. Of this total market share, nickel-cobalt-manganese materials accounted for 34% at 23.3 GWh, while lithium-iron-phosphate batteries continued to dominate, capturing 65.7% with 45 GWh.

Stainless steel demand caps NPI price peaks
Nickel market dynamics are also closely linked to stainless steel demand, which significantly impacts nickel pig iron, or NPI, prices.

Commodity Insights data showed minimal movement of NPI prices at $117-$117.5/mtu in early Q3, before rising to a peak of $124/mtu on Aug. 12, driven by tight Indonesian ore supplies and fluctuations in the yuan-dollar exchange rate. However, this upward trend could not be sustained given weak stainless steel demand in China.
“Demand for stainless steel in the mid and downstream sectors remains weak, exerting pressure on upstream producers,” a trader said. “Stainless steel cannot sell at profitable prices, putting pressure on NPI.”

Consequently, NPI prices fluctuated between $122.5-$124/mtu before gradually declining in September, Commodity Insights data showed.

Platts assessed daily spot NPI with 10% nickel content at $128/mtu FOB Indonesia Oct. 21, up 8.6% since the start of Q3.
Source: Platts