According to a Macquarie analyst, global nickel prices may have hit a floor and could be poised for a recovery. Jim Lennon, the Macquarie analyst, cited several factors that are expected to drive this potential market rebound.
Firstly, Lennon noted that the supply adjustments, particularly in Indonesia, the top nickel producer, have helped address the nickel surplus. Indonesia has slowed the issuance of production permits, which has led to a drop in ore inventories at smelters and forced some companies to import ore from the Philippines. The Indonesian government has approved production quotas of around 240 million metric tons of nickel ore annually for the next three years, which falls short of the 260 million tons of ore demand estimated by the Indonesian Nickel Miner Association (APNI) this year.
Secondly, Lennon said that strong demand from the steel sector is expected to support nickel prices. Global primary nickel consumption is forecast to grow by 8.9% to 3.53 million metric tons this year, outpacing the 6.3% growth in supply.
Additionally, Lennon noted that nickel consumption in the battery sector, which stalled last year due to high battery stockpiles, is expected to resume its growth in 2024. The International Nickel Study Group estimates that primary nickel demand will increase by 7.9% this year, similar to the growth in 2022.
Macquarie’s Lennon forecasted LME cash nickel prices at $17,379 per metric ton this year, down from $21,491 per ton in 2022. However, he expects the prices to rebound to $20,500 per ton in 2025 and gradually rise to $23,000 per ton in 2028.
The potential rebound in nickel prices is also supported by the output cuts announced by major producers such as BHP and Anglo-American, amid low prices and rising costs.