Almost all nickel products, including nickel pig iron (NPI), have been facing persistent pressure from oversupplied market conditions, sources have told Fastmarkets. Even nickel mixed hydroxide precipitate (MHP) – long known as one of the most profitable products across the industrial chains – is now facing loss-making pressure.
Fastmarkets’ daily assessment for nickel pig iron, 10-14% ni content, fob Indonesia was at $112-114 per nickel unit on Thursday January 11, a 13.74% drop from its highest at $130-132 per nickel unit when the assessment was launched on October 27.
With new projects in the pipeline for 2024 in Indonesia (the main supplier of the stainless steel raw material to China), pricing pressure will continue to build throughout the year, according to sources.
“We foresee the NPI surplus at some 200,000 tonnes for China in 2024,” an NPI trader based in Shanghai said. “That’s a huge number, and there’s just no major uptick in stainless steel production in the market to digest this surplus.”
Although the NPI price rebounded slightly at the end of 2023, supported by the destocking of NPI inventories held by traders and increased demand from stainless steel mills for the feedstock, any upside in NPI prices will be capped by the huge surplus, participants said.
Yet despite the bearish outlook, the downside for the NPI price will also be limited by NPI input costs. Prices of nickel ore, the NPI feedstock, has been relatively stable in recent weeks in both Indonesia and China, market sources said.
“It will also be very hard for NPI prices to tumble below 900 yuan [$126] per nickel unit, [because that is] basically equivalent to input costs for many Indonesian NPI producers,” a NPI buyer source said.
Meanwhile, Fastmarkets assessed the nickel mixed hydroxide precipitate, outright price, fob Indonesia at $10,970-11,520 per tonne on January 11. The price has been on a steady slide since it was launched in October last year at $13,600-13,800 per tonne.
MHP prices are approaching production costs of $9,000-11,000 per tonne, according to sources.
Slower capacity ramp up in 2024
Nickel was the worst performer among the base metal complex on both the London Metal Exchange and Shanghai Futures Exchange in 2023, losing more than 40% of its value on both exchanges. But while bearish sentiment continues to dominate the nickel market, market participants expect the downward move in 2024 to look “more modest” than in 2023 because smelter operation rates are set to be lower.
Due to the poor profitability for producers, market participants expect the ramp up of domestic refining capacity in 2024 to be much slower than that of 2023, sources said.
“Currently we only see a sparse number of unfinished cathode-making plants in China,” a nickel trader based in Shanghai said. “And, considering the weakness in nickel prices, we don’t expect all of these plants, including those plants put into use in 2023, to operate at full capacity in 2024, making 2024 refined nickel surplus look moderate.”
Market participants also expect to see the slower pace of nickel-related investment to be mirrored in Indonesia in 2024.
“From a fundamental standpoint, while we forecast a surplus in the nickel market for 2024, it is expected to be less pronounced than the surplus in 2023. This represents a positive development in terms of the rate of change,” Fastmarkets analyst Boris Mikanikrezai said.
On December 20, Nanjing Hanrui Cobalt said in a notice that it would scrap its high-pressure acid leach (HPAL) project, which had a projected capacity of 60,000 tonnes of nickel content, citing shrinking economic value amid unfavourable market conditions.
Multiple sources told Fastmarkets that Huayou’s Huashan nickel-cobalt project with an annual output of 120,000 tonnes of nickel content was also on hold. The project was originally scheduled to launch in 2025.
Fastmarkets principal analyst Olivier Masson forecasts MHP output in 2024 to reach 312,000 tonnes of nickel contained, a 28.13% year-on-year jump from an estimated 243,500 tonnes of nickel contained in 2023.
Masson’s NPI forecast for 2024 is 1.713 million tonnes of nickel contained, an 1.48% increase compared with the estimated output of 1.688 million tonnes of nickel contained in 2023.
Fastmarkets launched NPI and MHP fob Indonesia prices on October 27, 2023, to provide greater transparency to the market for NPI and MHP produced in Indonesia.
Fastmarkets currently publishes the following nickel prices in the Asian markets.
Key nickel insights and forecasts from our analysts
The nickel market registered a significant surplus in 2023 and this is set to remain the case in the short-to-medium term, even though the scale of the oversupply is set to decline in 2024 and subsequent years. These forecast surpluses are not an indication of weak demand. Instead, it is the pace of supply growth that is set to keep the market in a state of structural oversupply, even after accounting for project deferrals. As a result, it is difficult to be bullish on the price outlook in the medium term.
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