What’s the current environment in the nickel space across both supply and demand?
We are in an oversupplied market now and we are estimating that we will have a surplus by the end of this year of around 195Kt nickel. That comes on the back of surpluses in both 2022 and 2023. We are also forecasting surpluses out to 2029, when we think the nickel market will come back into balance. This is all to do with the ramp up in Indonesian output which has increased from only 38.1Kt Ni in 2015 to over 1.6Mt Ni in 2024 to become the world’s largest producer.
If we look at production this year, we are seeing an increase of about 2.8%, and around 2.3% in demand. We see some pick up next year both in terms of supply and demand, though predominantly we would expect that this would be from the stainless sector in China, especially as we have seen a softening of demand for electric vehicles (EV’s) batteries, with the removal of subsidies and incentives in some countries. At CRU we contracted our EV uptake forecast a couple of months ago which resulted in demand for nickel contracting by 100,000t in terms of nickel units in 2024.
So overall it is a more subdued environment for nickel demand now. We expect that as the Trump presidency commences, and as policies become clearer, we will have a better picture of what will happen next in the critical minerals space, and then we can align our forecast as policies change.
Looking at the fundamentals we see that demand is softer, production is high, and as a result, we are seeing prices range between US$15,500/t up to around US$18,000/t. We do not see prices going lower than this simply because the cost base is higher than it was five to 10 years ago. It is more expensive to produce nickel now and that is why we do not expect to see a lower price range.
Nickel demand has gone down a bit in relation to EVs, how does this critical mineral designation influence the outlook?
Nickel is essential for the green energy transition, decarbonization, and electrification. As a consequence it has been classified as a critical mineral. This, however, has not prompted accelerated development of new nickel projects. In Australia, NiCo Resources Wingellina nickel cobalt project and others have been awarded major project status (MPS) but we do not expect to see production from these assets for at least a few years.
Exploration is still happening in and outside of Indonesia and there are projects that are moving ahead now, even in Western Australia. But when we see so many producers deciding to place their operations on care and maintenance, most recently BHP’s Nickel West assets for instance, the current price environment is not supportive of additional nickel units coming from many areas outside of Indonesia.
While nickel is classified a critical mineral, given the market is achieving consecutive surpluses and likely to remain this way over the mid-term it will be difficult for junior explorers and miners to get funding for new projects.
What’s Indonesia’s current role within the whole nickel value chain?
Indonesia has effectively secured supply security for lower-cost nickel products across the global value chain and is now the world’s lowest cost nickel laterite producer.
Indonesia, through Chinese investment, has created a centre for excellence in its large industrial parks at Morowali (IMIP) and Weda Bay (IWIP) to name but two. Indonesia has been incredibly effective in developing its nickel supply value chain over the last 10 to 15 years, and it is now in the enviable position of being able to produce all nickel products. Indonesia can cater to all markets, it can provide Class I products for EVs and more specialised applications, but it also can provide Class II products, such as NPI (nickel pig iron) for stainless steel.
Indonesia has more recently emerged as a large producer of intermediate products such as mixed hydroxide precipitate (MHP) via the utilization of high-pressure acid leach (HPAL) technology. In the beginning, Indonesia, through Chinese sponsorship, was very much a nickel pig iron producer and this is why the rest of the world was able to use their sulphide and laterite operations to provide nickel units for other uses and let Indonesia take up the slack in terms of stainless demand, especially from China.
However, as demand for EV batteries escalated a couple of years ago, there was an increasing need from China to get nickel sulphate, a pre-cursor for EV’s batteries manufacture. To fulfil this demand battery manufacturers started dissolving Class I material (cathode and briquettes) to produce nickel sulphate, but this was an expensive way to produce nickel sulphate. To lower costs and monetise all the nickel units of the limonite portion of the orebody Indonesian producers were able to start producing MHP in large volumes which could be used to produce nickel sulphate.
Across Indonesia’s industrial parks the government aims to reduce carbon emissions by limiting the number of new coal fired power stations. As a consequence, China’s Tsingshan and its various local joint venture partners at the IMIP and IWIP are starting to shift away from coal intensive pyrometallurgical processes, aka rotary-kiln electric furnaces (RKEFs) in favour of using HPAL because it is less carbon emitting.
It is possible to get the same class one product by using HPAL to produce MHP, which is then sent to your cathode plant to become the feedstock as opposed to using a smelted product such as nickel matte, this effectively reduces the operations carbon footprint. It is estimated that emissions would be as low as 8t -10t of CO2 per tonne of nickel produced, which is far less than what you would get from an NPI or a matte production process at over 55t of CO2 per tonne of nickel produced. So, you can see that Indonesia is really trying to turn the environmental idea of producing dirty nickel around to provide this clean, safe, cheap, and reliable source of nickel.
Indonesia now dominates nickel supply and is taking up almost two-thirds of the cost curve. They have been very successful in becoming a low-cost supplier of nickel and their supply has disrupted the market to the point where producers elsewhere have had to close as they are no longer cost competitive.
You’ve touched on China’s role in developing and investing in the Indonesian nickel space. What are some of the other players, investors or otherwise, who have contributed to the to the domestic nickel economy?
China’s Tsingshan has been one of the largest foreign investors in Indonesia to date but other foreign companies such as Nickel Industries from Australia have established relationships with both Chinese and Indonesian partners. Many of the world’s automakers, such as Ford, Mitsubishi, Hyundai, and Toyota are also on the ground or looking to invest in Indonesia to secure supply for when they are going to need nickel units for EV batteries.
How big of a role are the auto OEMs taking within the Indonesian nickel space?
Indonesia is set to become a large consumer of nickel with a population of more than 200 million people. The government through initiatives such as the Indonesia Battery Corporation (IBC) is focussed on decarbonizing and electrifying vehicles across the country, and if this is done successfully Indonesia’s demand for nickel in batteries will increase rapidly.
This in turn will benefit automakers and OEMs already established in Indonesia as they will be able to supply the domestic market but also benefit from being in Southeast Asia and close to many other growing markets. So, their role is important as it is a more effective way for automakers to secure their supply chain.
