Macquarie Group expects LME nickel prices to be around $18,000-$20,000 per tonne in 2024, noting price forecasts have shifted to the downside due to persistent risks.

These include a weak economic outlook, the large nickel capacity overhang and the potential for cash costs to fall, Kallanish learns from a recent report by the Australian group. However, announcements of mine closures could provide some price support.

The research house notes that nickel prices could struggle to rise sustainably above $20,000-21,000/t over the next five years if supply additions to Indonesian capacity come on stream anywhere near the levels planned.

Macquarie says the global nickel supply surplus has been reduced from over 200,000 t to 158,000 t as a result of lower nickel pig iron production in Indonesia. This is due to lossmaking induced cuts by some producers and lower availability of nickel ore.

It has identified over 5m t/y of potential Indonesian capacity by 2027 versus 2022 production of 1.45m t and world output of 3.1m t. This means surpluses remain in the analysts’ base forecast for the overall nickel market all the way out to 2027, most likely in all main product categories.

Yet, Macquarie notes nickel demand growth remains the strongest of the base metals at an average of 7% a year from 2022-2030, driven mostly by demand from the EV battery sector.

This year, Chinese production and consumption of battery-grade materials have been weaker-than-expected in part due to supply chain destocking amid falling prices, and also due to a surge in non-nickel chemistries such as lithium iron phosphate (LFP).

Nickel use in batteries grew strongly in 2022, reaching an estimated 486,000 t – an increase of 119,000 t y-o-y – with China accounting for around 80% of global use. Growth slowed in H1 2023, particularly in China, where nickel usage fell around 20% when compared with H2 22, albeit still up 5% y-o-y, Macquarie says.

“We expect a recovery in H2 2023 and growth is projected to remain strong in every year out to 2027, when consumption should exceed 1m t. While there is a trend towards no-nickel batteries (LFP), there is also a trend towards higher nickel batteries (up to 90% Ni content) in mid-range and higher performance vehicles to counter range anxiety concerns, particularly outside Asia,” the group notes.

The analysts forecast nickel prices will average $22,224/t this year, down from $26,129/t in 2022.