Nickel’s price has recently experienced a remarkable rally. After facing downward pressure throughout 2023, it has bounced back vigorously. The three-month nickel contract on the London Metal Exchange (LME) hit a peak of US$19,739 per ton on a Monday in late April, marking its highest point since the previous September. As of a recent Friday trading session, the price remains strong at around US$19,237 per ton, equivalent to approximately Rp 308.2 million, reflecting a 15.8% increase since the beginning of the year. This makes nickel the third strongest performing metal, following closely behind tin and copper. This recent surge is a clear indicator that the value of nickel is on an upward trajectory, signaling a potential feast for the country’s economy.
The uplift in sentiment towards nickel comes amidst producers’ struggles with low prices hampering production levels. This situation has led to the closure or downsizing of production capacities by several miners, especially with the rise of low-cost production from Indonesia. Industry giants like BHP Group have raised concerns over the diminishing profitability margins, indicating a significant impact on mining operations in Western Australia, with 30% of mining capacity shut down and another 30% grappling with profitability issues.
Supply reductions, influenced by the low price environment, have started to alleviate the surplus metal available in the market, though a full recovery remains unseen. The market is bracing itself for a third consecutive year of nickel supply exceeding demand, per the International Nickel Study Group (INSG). However, the supply surplus for this year is projected at 109,000 tons, a decrease from previous years’ surpluses, thanks to revised production estimates aimed at sustaining higher prices.
Global production is still expected to grow by 5.9% this year, bolstered by Indonesia’s continued production expansion. Similarly, pure nickel production in China is on the rise, driven by an acceleration in imports of nickel products from Indonesia. Meanwhile, global demand is forecasted to increase by 7.9%, although this is a downward revision from earlier predictions.
The primary user of nickel, the stainless steel sector, has shown robust demand in 2023, with a 5.4% increase in smelting operations. However, the expected growth in demand from the electric vehicle (EV) battery sector has fallen short of expectations. This is partly due to a slowdown in the EV market and the resurgence of iron lithium phosphate (LFP) batteries as alternatives to nickel.
Indonesia’s role as a leading nickel producer and exporter is becoming more crucial in the face of these market dynamics. The country holds a commanding 23% share of the world’s nickel reserves, with abundant resources yet to be explored. This positions Indonesia favorably as global nickel prices continue to rise, suggesting a potential windfall for the nation’s export values, which have already shown impressive figures in the early part of 2024.
As the nickel market continues its dynamic trajectory, Indonesia stands at the forefront, ready to capitalize on the evolving landscape of global commodities. This outlook not only shines a light on the promising future of nickel but also underscores Indonesia’s pivotal role in the global commodities market.