Nickel price rebound not imminent, ING says

Nickel may have a presence in emerging and established energy sectors, but that does not seem to be helping its near-term demand or price prospects, according to one recently issued report.

Although a supply strain and price surge for the metal has been predicted in part because of its use in stainless steel oil and gas sector piping and its presence in emerging battery configurations, this year is not shaping up as a bull year for the nonferrous metal.

In a July 10 report, Netherlands-based banking firm ING calls nickel “the worst performing metal on the London Metal Exchange [LME] so far this year, with prices slumping 37 percent in the first half of the year.

"This underperformance is likely to continue as we head into the second half of 2023, with the market likely to test lower levels amid a weak macro picture and sustained market surplus.”

The six-page report authored by Ewa Manthey, a commodities strategist with the bank, points to the slumping Chinese economy as part of the problem on the demand side. “Indonesia’s nickel mine output grew by 48 percent to 1.58 million metric tons in 2022, boosted by the ongoing commissioning of nickel pig iron (NPI) and stainless steel projects," Manthey writes regarding supply.

She says output there grew by another 41 percent in the first three months of 2023, according to data from the International Nickel Study Group (INSG).

While Indonesia churns out nickel, China (even though its companies funded many of the Indonesia nickel projects) has failed to keep pace on the demand side. “China’s imports of refined nickel have fallen to [their] lowest levels in almost 20 years as the country shifts to Indonesia’s supply of Class 2 intermediate nickel products,” Manthey writes. “China’s imports of Class 1 refined nickel totalled just 3,204 metric tons in April, the lowest monthly total since January 2004.

“We forecast nickel prices to remain under pressure in the short term as a surplus in the global market builds and slowing global economy mutes stainless steel demand. We see prices averaging $21,000 per metric ton in the third quarter and $20,000 per metric ton in the fourth quarter."

The energy sector eventually should help nickel rebound, ING adds. “Prices should, however, remain at elevated levels compared to the average prices pre the historic LME nickel short squeeze due to nickel’s role in global energy transition," it reports. "And, the metal’s appeal to investors as a key green metal will support higher prices in the longer term. In electric vehicle batteries, nickel boosts their energy density and increases their drivable range.”

The bank’s outlook for copper is not dramatically different. In a late-May analysis, Manthey writes that the copper price is falling “on weaker-than-expected China demand, in what is normally a peak construction season and subdued demand in the United States and Europe. Copper is also weighed down by a strengthening U.S. dollar, which makes copper more expensive for Chinese buyers.”