Fitch expects related dynamics to cap worth development in 2024 as manufacturing in key producers China and Indonesia surges forward.
Regardless of a quick rally earlier within the yr that pushed costs to a year-to-date excessive of $21,615/tonne on Might 20, nickel costs closed at $17,291/tonne on June 28, weighed down by deteriorating investor sentiment, Fitch famous.
This stage represents a year-to-date improve of 4.3% but in addition a big 15.5% month-on-month contraction as market optimism eases. The dramatic reversal in market sentiment since early June has the potential to strain nickel costs additional over Q3 2024.
Regardless of the pressures on nickel costs at current, Fitch expects upside dangers – together with potential provide disruptions and a weakening of the US greenback later within the yr – to put a flooring below costs all year long, stopping a big decline from present ranges.
On the provision facet, Fitch anticipates {that a} important improve in 2024 (as seen in 2023), fed by heightened manufacturing in Indonesia and China, would be the core driver of worth losses. It initiatives a surplus of 253,000 tonnes within the international nickel market in 2024, up barely from a surplus of 209,000 tonnes estimated for 2023.
This glut is primarily attributed to Indonesia’s elevated manufacturing of nickel pig iron and intermediate nickel merchandise, a direct consequence of heightened funding in its nickel sector following the imposition of a nickel ore export ban in 2020, Fitch famous.
Within the first quarter of 2024, Indonesia’s refined nickel manufacturing rose 24.7% to 383,000 tonnes, up from 307,000 tonnes throughout the identical interval in 2023. Fitch expects an annual nickel manufacturing development price of 17.0% in 2024.
Outdoors Indonesia, the world’s second-largest producer of refined nickel, China, registered development of two.3% y-o-y within the first quarter of 2024 to 220,000 tonnes, up from 215,000 tonnes in 2023.
Quick, lengthy, internet LME funding funds nickel positions
The approval of recent nickel manufacturers on the LME was a strategic response to deal with low inventories and cut back the specter of worth volatility, Fitch identified.
“Together with the unraveling of Xiang Guangda’s brief place that led to costs momentarily breaching $100,000/tonne, low shares have been an element that contributed to the value spike in March 2022 and which proceed to pose upside worth dangers,” Fitch reported.
To appropriate low stock ranges and construct up liquidity, the LME resumed Asian buying and selling hours on March 20, 2023, after halting them after the value surge on March 2022. This goes alongside different measures geared toward stabilizing the market, similar to setting each day buying and selling limits and accelerating the method by which new nickel manufacturers will be delivered on LME contracts.
Lengthy-term outlook
Past 2024, Fitch expects nickel costs to extend steadily to 2028, rising to $21,500/tonne because the market surplus narrows on the again of surging demand for nickel together with the rise within the manufacturing of EV batteries.
Upwards strain on costs will probably be partially offset by the continued ramp-up of output in Indonesia, pushed by technical advances in changing lower- grade Class 2 nickel ore that’s ample in Indonesia into higher-grade Class 1 nickel that can be utilized within the battery trade.
Fitch forecasts costs to achieve $26,000/tonne in 2033 because the market surplus narrows considerably to 24,500 tonnes, placing upward strain on costs.
(Learn the complete report right here.)