Nickel saw solid price momentum in the first half of the year, benefiting from investor sentiment and speculation across commodity markets that saw surge in prices for both precious and base metals.
However, price highs were short-lived as nickel supply and demand fundamentals provided pressures that saw steep declines.
Among the influences has been a supply of laterite nickel flooding the market out of Indonesia, which is a contributing factor to mine curtailments in New Caledonia, Australia, and Europe. Meanwhile, high demand for battery production in China has yet to reach levels to make up for the oversupply in the market.
The third quarter opened with the price of nickel facing a downward trend that started after it reached a yearly high of US$21,615 per metric ton on May 20. The price on July 1 had fallen to US$17,357. The following week saw a pause in the downward trend and was briefly lifted to US$17,473 before resuming its downward trajectory to US$15,769 on July 25.
After bottoming out, the price quickly climbed to US$16,604 on July 31.
Nickel remained largely rangebound between US$16,150 and US$16,500 for the start of August, but saw upward momentum in the middle of the month that pushed the price to US$17,136 on August 27.
The beginning of September saw the price collapse again, reaching a quarterly low of US$15,741 on September 10 and just shy of the year-to-date low of US$15,668 set on February 9. However, pricing pressure wasn’t to last and the price of nickel saw rapid gains through to the end of September reaching a quarterly high of US$17,698 on October 1.
The big story for the last several quarters has been an oversupply of nickel from Asian markets, particularly Indonesia and Q3 2024 was no different.
Despite having a large percentage of global supply, refiners in Indonesia have increasingly been turning to nickel imports from the Philippines, the number two nickel supplier, to maintain operations. The first seven months saw imports rise to 3.37 million metric tons versus just 374,454 tons produced in 2023.
Although China remains the biggest benefactor and investor of Indonesia’s nickel industry, Indonesia has been working to distance it economically from its partner as it tries to work out deals with Western partners.
While Indonesia has been working to distance itself from Chinese investment over the past few years to better position its nickel market for Western markets and inclusion under the US Inflation Reduction Act, a new trade pact looks to solidify ties with China.
Multiple cooperation deals were signed following a November 9 meeting between Chinese President Xi Jinping and Indonesian President Prabowo Subianto, which would see China investing more than US$10 billion into strategic sectors including nickel.
Even though demand for batteries continues to grow, it hasn’t been able to outpace the oversupply situation, this has largely been due to a weak Chinese economy.
China is the largest consumer of nickel in the world, with a majority of the metal destined to be used in the production of stainless steel, but a beleaguered real estate sector and broad economic deflation have dampened demand.
In Canada, the government pledged C$46 billion for the development of four EV battery production plants that will require more raw materials than the Canadian mining sector can currently supply.
“That’s only speaking from the standpoint of the four battery factories, to say nothing about all of the other needs that our economy requires, or that the US requires, including its defence industries. Unless we achieve the above, and this is the irony, our reliance on foreign sources for minerals and metals is only going to increase,” he said.
Overall, Gratton believes that there needs to be an additional C$32 billion in financing for mining and midstream processing projects.
Investors should consider China’s outsized influence over the nickel market, both in terms of control over refined supply and demand from real estate and battery sectors.
Securities Disclosure: I, Dean Belder, hold no direct investment interest in any company mentioned in this article.
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