Nickel oversupply to persist on expansion, slower demand growth, industry experts say
A surge in new nickel supply in Indonesia, the world's biggest producer with a market share of about 63%, has led to benchmark prices halving over the past three years.
"The market is in oversupply, and in Indonesia, several projects in the pipeline will be completed soon, increasing production capacity," Macquarie analyst Jim Lennon told an industry conference organized by Shanghai Metals Market in Jakarta.
Lennon expects the surplus to continue until 2027-2028.
The most-traded nickel contract on the London Metal Exchange traded at $15,380 per metric ton as of 0400 GMT on Thursday, after touching a five-year low of $13,865 on April 7. Nickel hit a record high above $48,000 a ton in early 2022.
Lennon said the $15,000 level is key for industry costs. After production cuts began in 2022-2023, half of existing producers are at risk if prices fall below that level, he said.
Meanwhile, nickel demand growth has been weighed down by the surge in use of cheaper lithium iron phosphate batteries.
The analyst has cut his estimate for the battery sector's nickel demand in 2030 to 967,000 tons, compared with an industry consensus forecast for 1.5 million tons two years ago.
The battery sector consumed 518,000 tons of nickel last year.
Denis Sharypin, strategic marketing director at Russia's Nornickel, said prices pushed down by oversupply mean that about one-fourth of nickel producers globally are making losses on a cash-cost basis.
Indonesian smelters of nickel pig iron, an alloy used in stainless steel, have also been battling compressed margins, said Steven Chen, global sales head at Eternal Tsingshan Group Ltd, part of China's Tsingshan Holding Group.
"Smelters are really struggling, which may lead to reductions in production, and widespread cutbacks or shutdown in some of the smaller smelting operations may be in a not-distant future," Chen said.
Indonesia's mining minister has said the government will manage nickel ore supply and demand to support prices.
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