BMI, a Fitch Solutions firm, is revising down its nickel price forecast for 2023 to $23,500/tonne from $26,500/t as Class 2 nickel production volumes rise significantly, pushing the market into deeper surplus, Kallanish notes. 

“We expect to see muted gains for the remainder of 2023 as the market remains in surplus, demand continues to be limp and market volatility threatens investor sentiment. Nevertheless, we see some support from tight LME inventories and a weakening US dollar, which will prevent prices collapsing to pre-pandemic levels,” BMI says. 

The research house maintains the view that global nickel production will increase significantly in 2023 on the back of a ramp-up in Indonesian and mainland Chinese refined nickel output, pressuring prices.

It forecasts an excess supply in the nickel market of 244,700 t this year, expanding from the surplus of 130,600 t seen in 2022. The main driver leading to oversupply in the global market is the ramp-up in Indonesia’s output due to greater investment in the country’s downstream nickel industry following the government’s ban on nickel ore exports in January 2020.

BMI forecasts Indonesian nickel production to rise by 20% year-on-year in 2023 with output volumes reaching 518,000 t, after a sharp rise in output of 31% year-on-year in 2022.

It has also seen a significant increase in Chinese supply, the world’s largest refined nickel producer, with output rising by 27.7% year-on-year to 212,000 t in the first three months of 2023. In the same period in 2022, this volume was 166,000 t.

On the demand side, BMI believes that nickel prices face additional pressure as global stainless steel production sees flat growth in 2023. It notes that physical demand for metals has been under pressure in recent months as a slow global macroeconomic environment and mainland China’s service-led recovery weigh on demand.

In 2024, it expects nickel prices to average $24,500/t, above the 2023 average as demand picks up. Beyond that, BMI forecasts nickel prices to increase at a faster pace in 2028, rising to $28,000/t as the market goes into deficit on the back of surging demand for nickel along with the rise in the production of EV batteries.

Nickel prices have averaged $24,450/t year-to-date as of June 27, lower than the average of $25,617/t seen in the full year of 2022. Nickel prices have been on a steady downward trend since January 2023, falling to the lowest level seen since September 2022 of $20,305/t on June 26, down 34.7% from the year-to-date high of $31,118/t seen on January 3 as excess supply of Class 2 nickel floods the market.