Solely Indonesia might help nickel recuperate from worth bust: Andy Dwelling

By Andy Dwelling

LONDON (Reuters) -Nickel ended 2024 buying and selling at four-year lows, a spectacular reversal of fortune for a metallic that soared so excessive in 2022 it nearly broke the London Steel Change (LME). 

There isn’t a thriller to this dramatic story of growth and bust. 

Indonesia has flooded the world with extra metallic than it could take up, crushing the worth and leaving a path of casualties among the many remainder of the world’s producers. 

The market’s fortunes this yr rely upon whether or not Jakarta can tame the excesses of its nickel sector and align provide extra carefully with demand. 

There are optimistic indicators. Indonesia’s mining ministry plans to chop the nickel ore mining quota to 200 million metric tons this yr from a beforehand deliberate 240 million. 

The information has sparked a modest worth revival, LME 3-month nickel rising by 3% for the reason that begin of January. Whether or not it is sufficient to generate a extra sustained restoration stays to be seen. 

OUT OF THE SHADOWS

Indonesia has emerged because the world’s dominant nickel producer over the past decade. 

The nation’s mined manufacturing exploded from 358,000 tons in 2017 to 2.2 million tons in 2023, in response to the World Bureau of Metals Statistics. Indonesian provide was equal to over half of worldwide demand that yr. 

The Indonesian provide tsunami initially washed by way of the Class II phase of the nickel market within the type of stainless-steel inputs reminiscent of nickel pig iron. 

That is modified over the past two years after Chinese language operators mastered the expertise to transform Indonesia’s comparatively low-grade useful resource into high-purity Class I merchandise reminiscent of sulphate and refined metallic. 

The processing revolution has transferred the market surplus from the Class II shadows to the extremely seen world of trade buying and selling. 

STOCKS SURGE

The LME has listed 5 Chinese language manufacturers and one Indonesian model of refined nickel since its 2022 meltdown. 

The affect is obvious to see in rising LME stock. 

Low LME shares have been one of many causes for the worth going supernova in March 2022. They continued sliding by way of the primary half of 2023, falling under 40,000 tons for the primary time since 2007. 

LME stock has since surged to 172,206 tons on the again of Chinese language and Indonesian deliveries.

There was no Chinese language nickel within the LME storage system till August 2023. As of the top of December 2024 there have been 70,000 tons, accounting for 47% of on-warrant shares. The primary Indonesian metallic turned up in July final yr and amounted to over 7,000 tons by the shut of December.  

LME registered shares are solely a part of the larger shares image.

LME off-warrant shares have additionally grown, whereas Shanghai Futures Change shares have risen to a five-year excessive of 35,327 tons. 

Whole (EPA:TTEF) trade stock was nearly 230,000 tons on the finish of November 2023, the very best degree since 2021. 

That is excellent news for each exchanges. The bodily liquidity enhance has helped restore confidence in each markets, producing a restoration in buying and selling volumes after exercise slumped within the wake of the 2022 nickel disaster. 

It has been much less excellent news for anybody within the nickel manufacturing enterprise outdoors Indonesia and China. Rising shares have pushed the worth ever decrease. 

BATTERY DEMAND STUTTERS

It isn’t as if nickel demand has collapsed. 

The stainless-steel sector, which nonetheless accounts for the biggest share of the metallic’s utilization, carried out strongly in 2024. International melt-shop manufacturing rose by 6.3% year-on-year within the first half of final yr, in response to trade affiliation worldstainless. 

However nickel’s utilization in electrical car (EV) batteries has been weaker than anticipated.

Though world EV gross sales grew by 25% in 2025, a lot of the progress got here from China, the place automotive corporations are more and more shifting to non-nickel battery chemistry reminiscent of lithium-iron-phosphate. 

Western car-makers are sticking with nickel of their batteries however EV gross sales rose by a comparatively modest 9% in North America and contracted by 3% in Europe final yr, in response to consultancy Rho Movement. 

Furthermore, each Western and Chinese language automotive patrons are selecting hybrids over pure battery fashions and hybrids want smaller batteries. 

Researchers at Adamas Intelligence estimate that the worldwide sales-weighted common quantity of nickel deployed per passenger car battery was 12.6 kg in November 2024, down 16% from November 2023.

Whereas European EV gross sales are anticipated to recuperate this yr as harder emission guidelines kick in, North American gross sales face the problem of Donald Trump rolling again the Biden administration’s EV subsidy scheme. 

SUPPLY DISCIPLINE

Indonesia has made no secret of its want to leverage its nickel provide dominance into pricing dominance. 

It now has that energy. 

The important thing query for the nickel market is the way it will use that energy. 

The reduce to this yr’s ore quotas means that Jakarta is aware of the worth has fallen too far even for a few of its personal producers. 

The trick might be tailoring manufacturing charges to a fast-evolving EV battery demand dynamic. With out provide self-discipline from the world’s dominant producer, a sustained nickel worth restoration will stay elusive. 

The opinions expressed listed below are these of the writer, a columnist for Reuters.