Russian miner Nornickel estimates a higher-than-expected surplus in the global nickel market this year, mainly led by the growing production of low-grade nickel in Indonesia.

The company, which claims to be the world’s largest high-grade nickel producer, says that “Indonesia is creating a supply glut and losing potential revenue by selling the country’s nickel resources at substantial discounts.”

It revised its 2023 forecast upwards from a 110,000 tonnes surplus to over 200,000 t. It expects an excess supply of 180,000 t in 2024, Kallanish learns.

According to the company, in early 2023, the price of nickel showed the worst performance of any non-ferrous metal on the LME. “This was caused not only by a largely speculative price increase of 45% in 2022 and subsequent correction, but also by worsening market fundamentals,” it explains.

The trend is due to a significant surplus in the Class 2 nickel market, starting in 2022 and set to continue during 2023-2024. At the same time, strong demand for metallic nickel in the alloys and special steel sectors supports LME’s Class 1 nickel prices.

Nornickel says global nickel demand has grown by an average of 7% per year since 2015. It now forecasts demand at 3.22 million t this year, from an earlier forecast of 3.34m t. The downward revision reflects lower stainless steel production in Indonesia and lower demand in the battery sector, amid a slowdown in EV sales and higher lithium iron phosphate (LFP) battery uptake. The latter’s chemistry doesn’t require nickel.

Meanwhile, nickel production is expected to remain virtually unchanged this year at 3.45m t, a 10% on-year increase. The growth is attributed to an increase in crude ferronickel production in Indonesia and the commissioning of new cathode production capacity in Indonesia and China, Nornickel says.

“Overall, nickel supply will exceed demand in China and Indonesia during 2024, while Western markets are expected to be fairly balanced,” it adds.

Longer term, the miner is optimistic about nickel demand growth driven by increased consumption in the battery sector, with sodium-ion batteries offering a new boost to demand. The battery technology contains nickel in its cathode.