Recently, according to foreign reports, Macquarie said on Thursday that the cost of producing low-grade nickel pig iron (NPI) in China will be the key to determining nickel prices. This view has triggered a new round of attention on the market's nickel price trend, especially after experiencing a 45% decline in Lun nickel in 2023.
The nickel market is under intense pressure. Nickel prices have reportedly fallen deep into the industry's cost curve, with more than 60 percent of global production cash flow negative at $16,000 per ton. This suggests that current price levels are untenable for many nickel producers. In this context, the production cost of nickel pig iron in China plays an increasingly decisive role in nickel prices.
China is an important player in the global nickel market, with large production volumes, especially in the low-grade nickel pig iron sector. Therefore, the production cost of nickel pig iron in China has a significant impact on the global nickel price. Macquarie's view is based on an in-depth analysis of the cost of nickel pig iron in China, which he believes is a key factor in determining nickel prices.
Ore prices in Indonesia and China have fallen sharply in recent months, leading to lower costs, particularly for nickel pig iron. This has had an impact not only on local producers, but also on global nickel prices. Since these two countries are the world's largest sources of nickel supply, their cost changes have a profound impact on the entire market.
Still, Macquarie believes nickel prices could rise in the second half of 2024 if more supply cuts are seen globally. This expectation is based on the basic principle of supply and demand, which is that a decrease in supply may lead to an increase in price. This perspective provides a new way of thinking about the market, and investors and industry participants need to pay close attention to the development of these factors and make strategic adjustments accordingly.
