Nickel prices have recently been under pressure amid a supply glut in the global market

Nickel prices have been increasing lately due to large supplies by Indonesia

Nickel prices have been under pressure due to an oversupply driven largely by Indonesia’s rapid expansion in production. Over the past decade, the country has transformed into the world’s dominant supplier, with its mined output soaring by roughly over 500% in the past six to seven years. This influx has created a surplus that is weighing heavily on global prices now.

The market’s outlook now hinges on Indonesia’s ability to cut production and align supply with demand. A step in this direction came with the announcement of a reduced nickel ore mining quota for 2025—200 million metric tons instead of the previously planned 240 million. This decision sparked a modest 3% recovery in the price of London Metal Exchange (LME) 3-month nickel in early January. However, whether this is enough to drive a sustained rebound remains uncertain.

Initially, Indonesia’s nickel surge affected the Class II market, mainly supplying nickel pig iron for stainless steel production. But in recent years, Chinese producers have refined techniques to convert Indonesia’s lower-grade ore into high-purity Class I products, such as nickel sulfate and refined metal. This shift has moved the market surplus from obscured industrial uses into the highly visible exchange-traded space, further depressing prices.

While stainless steel production has remained strong, growing 6.3% year-on-year in the first half of 2024, demand for nickel in electric vehicle (EV) batteries has been softer than anticipated. Nickel-heavy battery chemistries remain prevalent in Western markets, but EV sales in North America rose only 9%, while European sales declined by 3% last year.

Hybrid vehicles, which require smaller batteries than fully electric models, have gained popularity in both China and the West. This shift has reduced the amount of nickel used per vehicle, with an approximate 16% year-on-year decline in the average nickel content per passenger EV battery as of November 2024.

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Looking ahead, European demand may pick up due to stricter emissions regulations, but uncertainty looms over the North American market, particularly with potential policy shifts if Donald Trump reverses EV subsidies. The nickel market’s future depends on whether Indonesia exercises supply discipline. The recent quota cuts suggest an awareness that prices have fallen too low, even for some domestic producers. However, sustained price recovery will require careful production adjustments to match shifting demand trends in the EV sector.

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