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LONDON (Reuters) – Strong demand from stainless steel mills and electric vehicle battery makers is expected to support nickel prices over the coming months, but increased supplies from the main Indonesian producer are expected to weigh on next year.
Benchmark nickel prices on the London Metal Exchange, at $ 19,500 per tonne, are up more than 20% since April and their highest since February.
Chart: Nickel price:
A few months ago, we expected surpluses in the second half of this year, but now shortages are more likely.
“This year has seen one of the most remarkable recoveries in nickel consumption, it has been driven by booming conditions in the stainless steel and battery markets,†said Jim Lennon, analyst at Macquarie .
“But the relentless increase in Indonesian production, combined with an expected slowdown in the rate of growth in nickel consumption is expected to tip the market towards oversupply in 2022/23.”
Graphic:
Macquarie expects demand to reach 2.8 million tonnes this year, a 16% increase from 2020 and a deficit of 83,000 tonnes. In March, he predicted nickel demand to grow at 10.6%.
Production of 300-series stainless steel containing 8-9% nickel jumped 36% in the first half of 2021 compared to the same period last year.
Graph: World nickel consumption by first use 2020 and 2030:
Stainless steel accounts for around 70% of global nickel consumption, while electric vehicle batteries consume less than 10%, but the latter figure is expected to rise alongside EV sales as the world strives to improve. reduce carbon emissions.
Supplies are under pressure this year due to disruptions at nickel mines in New Caledonia, Russia and Canada. Analysts estimate that the market lost around 60,000 tonnes of nickel as a result of these disruptions.
COVID-related restrictions also raise the possibility of delays for new projects in Indonesia’s main producer this year.
Citi analyst Oliver Nugent expects nickel prices to hit $ 20,500 over the next three months and cites the stock market decline as a sign of “brewing physical tightening.”
Chart: Nickel stocks:
Nickel stocks in warehouses approved by the London Metal Exchange, at 219,180 tonnes, have fallen more than 15% since April, while those monitored by the Shanghai Futures Exchange are near their lowest level in five years.
“We remain on a downward trend in 2022 as we anticipate strong supply growth in Indonesia,†Nugent said.
Chart: Citi Nickel Price Forecast:
Reporting by Pratima Desai; Editing by Pravin Char
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