Nickel price slumps as global production soars

Nickel smelter in Sorowako, Indonesia. (Image by Marcelo Coelho, courtesy of Vale).

Chicanery on the London Metal Exchange aside, global nickel mining is in rude health. 

The latest data from International Nickel Study Group shows a massive 22% year on year jump in January for global nickel production despite registering a decline in output from the December total.

At the current pace, mined nickel output is set to exceed 3.2 million tonnes per year. The jump was driven primarily by continued gains in Indonesian production which increased by over 41% compared to the same month last year. 

Refined nickel demand shrunk by 5% in January and rose by a more modest 2% compared to 2022. The January figures translate to annual demand of 2.8 million tonnes, to give an apparent market surplus of 255,000 tonnes, BMO Capital Markets points out.

Price rout 

Nickel prices have fallen by 28% this year to last trade at around $22,300 a tonne on Thursday. Reuters reports the discount or contango for the LME’s cash nickel contract against the three-month delivery contract increased to as much as $362 a tonne this week. The gap is the highest since December 2007 and a sign of significant lack of demand in the spot market.

Project Blue, a critical materials market intelligence firm, says the LME resuming Asian-hours trading (now postponed to Monday) should see liquidity pick up and offer a nickel price that better reflects market fundamentals. As such, the company sees prices continuing to normalise off their inflated highs over the next three months.

Glencore in its annual report on Thursday said a significant excess of non-LME grade units has incentivised the conversion of these units into nickel matte and nickel sulphate, both eligible for the battery segment and feedstock for LME grade production.