Global nickel prices are set to fall in the next few years as Indonesia, the world's largest nickel producer, increases supply and production costs fall, industry watchers predicted at a metals conference this week.
Chen Yan, head of basic materials and engineering research at CICC, said Indonesia accounted for 38 percent of global supply in 2021 and its nickel production capacity will quadruple to 1.2 million tons between 2021 and 2025.
The benchmark three-month nickel contract on the London Metal Exchange is likely to fall 7.5% to $23,741 a metric ton this year and below $20,000 a metric ton in 2024 as production growth outstrips demand, said Ellie Wang, an analyst at CRU Group in Shanghai.
Indonesia mainly produces nickel pig iron (NPI), matte nickel and mixed hydroxide precipitate (MHP), an intermediate product of nickel sulfate used in the production of lithium-ion batteries.
"The planned additional capacity in Indonesia will significantly ease the nickel sulfate supply bottleneck over the next three years," Chen said.
Indonesia's MHP supply is expected to grow fourfold to nearly 600,000 tonnes between 2022 and 2027, including projects being developed by PT legend, PT QMB, Huayou and Huafei, CRU's Wang said.
Meanwhile, according to Wang Yanchen, managing director of SMM UK, Indonesia's new raw material supply will climb from 114,700 tonnes in 2022 to 201,800 tonnes in 2025.
According to the Shanghai Metals Market, global refined nickel production will rise to 99,800 tonnes by 2025 from 83,400 tonnes in 2022.
Nickel has traditionally been used in stainless steel, but is increasingly being used in the battery industry as electric vehicles become more popular.
Stainless steel led demand is expected to reach 2.4 million tons in 2025, up from 2.1 million tons in 2022, CICC's Chen said.
Demand from the lithium iron battery industry will climb to 868,000 tons in the same period, more than double the 342,000 tons in 2022, Chen said.
In addition to softer market fundamentals, lower costs will further depress nickel prices, Mr Chen said.
"The development of laterite (ore) will ease supply shortages and lower production costs, leading to a decline in the ex-factory price of new products and nickel sulfate," he said.
