Nickel Prices Surge as Supply Concerns Mount
The price of nickel has soared to $19,045 per ton, up by 15% since the beginning of the year, making it the third-best performing metal after tin and copper. This has been fueled by improving sentiment in the market as low prices have forced many nickel producers to close or reduce capacity due to competition from lower-cost Indonesian production.
BHP Group, a major player in the industry, recently raised concerns about the impact on Australian mine capacity, with 30% offline and another 30% at risk due to squeezed margins. The supply response to low prices has helped reduce the surplus of metal in the market, although there is still an oversupply issue.
According to the International Nickel Study Group (INSG), the world is expected to see a third consecutive year of nickel oversupply. The latest market balance assessments from the INSG forecast a surplus of 109,000 tons this year, a slight decrease from previous years but still a significant overhang.
While global production is expected to grow, particularly in Indonesia and China, demand growth from the electric vehicle battery sector has been lower than anticipated. This, along with a resurgence in nickel-free battery chemistry, has created headwinds for the market.
Investment funds have also played a role in the recent rally, reducing their short positions and taking on more bullish positions. However, with the market still facing oversupply challenges, further supply adjustments may be needed to sustain the rally. Overall, the nickel market continues to face uncertainties as supply concerns persist.
