The nickel market is facing a massive supply glut this year as surging Indonesian production continues to outpace global demand.
The International Nickel Study Group is forecasting a supply-demand surplus of 239,000 tonnes, the largest in at least a decade and a significant increase from last year's excess of 105,000 tonnes.
The supply surge, though, is not coming in the form of the Class I refined metal traded on both the London Metal Exchange and the Shanghai Futures Exchange.Nickel market balances from the International Nickel Study GroupThe INSG estimates global nickel usage rose by 6.3% last year and forecasts it will almost match that rate this year.
Chinese production started recovering in the fourth quarter as the country emerged from zero-Covid restrictions but any positive impact was offset by sharp drops in European and U.S. run-rates in line with slowing economic activity.Taking up the slack from a weak stainless sector is demand for nickel from the electric vehicle battery sector.
The country's nickel mine output grew by 48% to 1.58 million tonnes in 2022 and by another 44% in the first two months of this year, according to the INSG's most recently monthly bulletin. Much of the new production, however, is targeted at the fast-growing battery sector with operators experimenting with new technology to cross the processing hurdle of converting Indonesia's relatively low-grade laterite resources into a form that can be used in lithium-ion batteries."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 ," the INSG said.
Shanghai registered stocks are lower still at just 1,496 tonnes as China's imports of refined metal are increasingly replaced with intermediate products heading for the EV sector.
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