Global production of primary nickel this year will exceed its usage in 2022 and 2023 resulting in a surplus of 1.44 lakh tonnes this year and 1.71 lakh tonnes next year, the International Nickel Study Group has said. 

Production this year has been forecast at 3.036 million tonnes (mt) and in 2023, it will likely increase to 3.387 mt, the International Nickel Study Group(INSG) has said. The INSG estimate has not tried to adjust for any possible production disruption, a statement from the inter-governmental organisation founded in 1990 said.

Deficit to surplus

The organisation has estimated the global usage of primary nickel at 2.775 mt in 2021. For this year, it projects the usage to increase to 2.892 mt and 3.216 mt in 2023. “The implicit market balances are therefore a deficit of 163kt (1.63 lakh tonnes) in 2021, and surpluses of 144kt (1.4 lakh tonnes) in 2022 and 171kt (1.71 lakh tonnes) in 2023,” said the INSG, which comprises producer-, consumer- and trading nations.

The estimate has been released after government and industry participants extensively discussed current nickel market trends. “The INSG forecasts the global nickel market to shift to a supply surplus this year and to continue to remain in surplus next year due to negative growth expectations in the stainless-steel sector,” said ING Think, an economical and financial analysis wing of Dutch multinational financial services firm ING.

Halt in trade

Currently, nickel is quoted at $22,274 up 13.18 per cent year-on-year. This is a far off from the $100,000 a tonne it hit on the London Metal Exchange on March 8 this year after a Hong Kong-based trader got trapped going short. Trade in nickel was suspended for a few days before it resumed a few days later. 

Before trading on LME was halted, the metal gained soon after the Ukraine war broke out as Russia makes up 7.2 per cent of the global supply. Research agency Fitch Solutions Country Risk and Industry Research has forecast nickel prices at $22,500 in 2022 and $23,200 in 2023. 

The INSG said the combined impact of the Covid-19 pandemic and the situation in Ukraine has resulted in energy constraints, higher inflation and lower economic growth, and this has led to increased uncertainty in the global commodity markets. 

Drag effect of stainless steel sector

It said for 2022, the organisation expects negative growth in the stainless steel sector and increasing usage of nickel in batteries for electric vehicles (EV). In 2023, both sectors are projected to expand output. 

It pointed to the world stainless association figures for the first three months of 2022 showing that stainless steel melt shop production decreased by 3.8 per cent year-on-year to 14.5 mt. “

Nickel pig iron (NPI) production has been forecast to continue rising in Indonesia but it will decline in China further. “The conversion of Indonesian NPI to nickel matte in the country is anticipated to surge. Also in Indonesia, high-pressure acid leaching (HPAL) plants are being commissioned to produce mixed hydroxide precipitate (MHP) and are anticipated to continue to ramp up production strongly,” the organisation said. 

Both the intermediate products — nickel matte and MHP — will be exported to China to be further processed into nickel sulphate to produce EV batteries, it said. 

The INSG said historically, market surpluses have been linked to LME deliverable/class I nickel, but in 2023 the surplus will be mainly due to class II and nickel chemicals (principally nickel sulphate), which is used for electroplating and is a key ingredient in EV batteries.

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