[Ferro-Alloys.com]

 

The nickel market's supply overhang is not as significant as previously assessed, with physical supply-demand fundamentals tighter than market expectations and on track to balance sooner, according to the latest research undertaken by Australian bank Macquarie.

 

The bank today revised its 2024 surplus to 36,000t, well below the projected figure of 125,000t in February, adding that the market could even move into deficit if year-on-year Indonesian nickel supply growth falls below 13pc. Tighter fundamentals and planned supply curtailments this year mean London Metal Exchange (LME) nickel prices possibly bottomed out at about the $16,000/t reached early this year and now mostly have upside potential, Macquarie said.

 

The basis for Macquarie's new forecast was the revision of past calculations that had underestimated growth in Chinese consumption. This revision caused it to raise its 2023 estimates for nickel use in Chinese stainless steel production and high nickel alloys by 20pc and 25pc year on year, respectively. Macquarie also said that some estimates of Chinese nickel production had counted units twice, creating the illusion of a vast market oversupply in the past.

 

Macquarie revised its 2023 market balance data to show a nickel surplus of 170,000t, down from its previous estimate of 240,000t, adjusting for higher physical Chinese demand and the double counting on the supply side. Its 2023 Chinese consumption estimate moved up from from under 2mn t in February to almost 2.1mn t, adding 100,000t to world demand. 

 

Macquarie also expects Indonesia to keep 2024 domestic ore production licences (RKABs) at a lower level than 2023, indicating the current tightness in ore availability owing to delays could be prolonged. An overhaul of the country's ore pricing system could further raise nickel production costs and the floor for prices beyond Macquarie's previous assessment of $15,000-16,000/t.

 

After no growth in the battery market last year on persistent destocking, demand for nickel in batteries is also on track to rise sharply in 2024, Macquarie said.

 

Macquarie further said its previous estimates for nickel use in high-nickel alloys missed 20,000t of end-use. The nickel consumption market grew by 25pc year on year in 2023 to 130,000-140,000t and is poised for double-digit growth in 2024, Macquarie said.

 

Macquarie noted 254,000t worth of supply cuts in the nickel market, including 194,000t worth of ferro-nickel and NPI, 30,000t of nickel metal and 20,000t of concentrate. Macquarie expects the curtailments to now already be priced in.

 

The bank said it was still possible for nickel supply growth to accelerate again if the current price rebound persists, which would then once again grow the surplus, but it currently anticipates that the market has hit the low point for the present cycle. Argusmedia