Over the past few months, the price of the London Metal Exchange has fallen significantly nickel, at about $18,000 per metric ton. This drop is an impressive 42% compared to the beginning of this year. The reason for the decline was the global oversupply on the global nickel market, caused by a sudden increase in production in Indonesia.
The volume of nickel produced in this country increased sharply by 48% in 2022 and by another 31% from January to November 2023. Thus, Indonesia's share, which reached 1.3 million tons from Q1 to Q3 2023, now accounts for more than half of global nickel production. Supplies from this country previously mainly included matte and hydroxide, but according to research, in the near future Indonesia may launch its own production of pure forms of nickel that are in demand on the stock exchange.
In 2022, supply exceeded nickel demand by 104,000 metric tons. According to the latest experts' forecasts, in 2023 the surplus of this material will be 223,000 metric tons. The gap is expected to widen to 239,000 metric tons next year.
Although demand for nickel is expected to increase significantly in the coming years due to the use of this metal in electric vehicle batteries, analysts assume that supply will continue to grow at an even faster pace. This will create additional pressure on prices and push them down.
Indonesia can already be safely called a giant laboratory testing the unique chemical composition of nickel: many technicians are working on new ways to process the relatively low-grade ore mined in this country into cleaner forms.
As the technological gap between nickel matte (the so-called intermediate product) and pure metal is closing, the price gap in the market is also decreasing.
Overall, the decline in nickel prices is due to market congestion caused by an unexpected increase in production in Indonesia. This poses challenges to the industry, but also opens up new prospects for companies that are able to adapt to changing market dynamics and effectively use the opportunities provided by the excess nickel supply.
One of the most striking examples of such enterprises that are actively responding to the current situation is the St. Petersburg Precision Alloy Plant. One of the key areas of work PZPS — production of nickel-based precision alloys. At the same time, the company is continuously increasing the production of such materials, thereby increasing its competitiveness in the face of lower prices for raw materials.
