Nickel prices rise but fail to catch up with other base metals market

Nickel prices and, as a result, stainless surcharges, remain in the doldrums this month, recovering only slightly from last month’s sharp sell-off.
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Nickel prices drop in March

nickel price
leszekglasner/Adobe Stock

Nickel’s bull story took a hit at the beginning of March by announcements from China’s Tsingshan Group. The firm said it intended to produce battery-grade material from nickel matte, undermining the market’s electric vehicle (EV) narrative.
That is last month’s news. Reuters confirmed the move would effectively close the processing gap between the sort of nickel used by the stainless steel industry and that used for lithium-ion battery production. That undermines the perception that battery-grade nickel is a constrained market facing a looming wall of demand.
Yet, EV demand has always been part of the future, rather than the present.

Stainless steel consumption

Stainless steel consumption remains overwhelmingly the largest industry for nickel consumption.
Output among stainless producers is rebounding strongly since H2 last year — particularly in China but increasingly elsewhere.
Supply, though, remains the issue for nickel.
Reuters observes even the International Nickel Study Group (INSG) is reporting the market will remain in significant surplus this year. That is despite strongly recovering demand.
Reuters’ own polling suggests expectations are for a surplus this year of 31,000 metric tons, followed by 66,500 tons next year. Refined production grew by 5% last year and is forecast to grow by 9% this year.
Much uncertainty remains, however, about output from top supplier Indonesia.
But Chinese investment in the country’s refining capacity has been strong. Exports of ferro alloys and nickel pig iron (NPI) have surged as ore exports collapsed following the government bans at the start of 2020.
Indonesian mine output grew by an incredible 53% in the first two months of this year. All that ore is being processed and is likely feeding into domestic refiners to show up as exports of ferro alloys and refined nickel in the months ahead.
Nickel prices picked up a little late last month on the back of surging base metals prices. However, high LME stocks are a reminder the market remains in surplus.
It would take a significant change of narrative to see prices testing previous highs from late February anytime soon.
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