Amidst Plummeting Nickel Prices, China and Indonesia further to Cut Back on Production

China and Indonesia are planning to decrease their nickel production by a significant amount this year, aiming to mitigate financial losses caused by a recent drop in the metal's price, which is crucial for manufacturing stainless steel and electric vehicle batteries. This decision comes as a response to the diminished market value of nickel, which had previously soared to unprecedented levels in 2022 due to anticipated supply shortages from Russia. However, an increase in production from Indonesia, a major global supplier, alongside weakened economic conditions that reduced demand, led to a surplus that negatively affected prices.

Western mining companies have already made adjustments by shutting down operations or delaying projects, but these measures have not sufficiently impacted the market to elevate prices. Experts suggest that to realign supply with demand and support a market recovery, further cuts in production are necessary, especially in the production of nickel pig iron (NPI), a more affordable variant used in stainless steel production.

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The cost of producing NPI, especially considering raw materials like nickel ores, electricity, and coal, has rendered many operations unprofitable, particularly in China. Discussions around the pricing of nickel have also surfaced, with suggestions that nickel used in batteries may command a different price from that used in stainless steel, reflecting distinct market dynamics and production costs. This situation underscores the challenges faced by producers globally, including in locations like New Caledonia, Australia, and Canada, where operations may continue to incur losses unless there's an uptick in nickel prices.

According to Procurement Resource, China and Indonesia plan to cut nickel production to address financial losses from falling prices, impacting stainless steel and battery manufacturing. Despite previous adjustments, further reductions are necessary to balance supply and demand. The situation highlights global challenges in nickel production, with potential for continued losses without price recovery.