Nickel & stainless: global risks bear down

Challenging factors include excess primary nickel production, China’s property slump, sluggish manufacturing output and the on-going conflicts in Ukraine and the Middle East. Price volatility is another complication. 

As with other commodities, nickel prices at the London Metal Exchange have been pressured lower in recent months, with LME nickel futures falling from more than US$ 21 000 per tonne in May 2024 to as low as US$ 15 600 per tonne in late July – marking a three-year low.

Uncertain appetite

At the same time, nickel inventories in LME warehouses surged to more than 120 000 tonnes in early September, up from just 37 000 tonnes one year ago.

The rise in LME nickel inventories has been attributed in part to increased volumes of Chinese metal entering the warehouses. However, the heightened volatility in nickel prices reflects the shifting investment landscape that rattled equity and commodity markets early in the third quarter.

Uncertainty regarding global demand growth and the future path of monetary policy across the major economies continues to impact investors’ risk appetites at a time when manufacturing output is unsteady and nickel production is outpacing demand.

Higher output

According to estimates from Macquarie Insights, global primary nickel production during the first half of 2024 increased 5.8% year-on-year to 1.76 million tonnes. As has been the case, the gains are being driven by Indonesia and China, where combined primary nickel output increased 10.8% year-on-year to 1.3 million tonnes, accounting for nearly 75% of global supply.

Indonesian exports of contained nickel in all products including nickel pig iron (NPI) and nickel in stainless steel rose 22% year-on-year during Jan-Jun 2024 to 998 000 tonnes, according to Macquarie estimates. Nickel exports from Indonesia alone accounted for 57% of all the nickel produced in the world during the first half of the year, contributing to supply imbalances and putting pressure on producers in other parts of the world.

Scrap tightness

Of note, Macquarie reports that production of nickel-iron units used in the production of stainless steel such as ferronickel (FeNi) and NPI have actually declined this year, including a 27% year-to-date drop in global FeNi production.

In turn, the relative downturn in the availability of nickel-iron units reportedly contributed to tighter availability for stainless steel scrap. According to major stainless steel producer Outokumpu Oyj, the company’s deliveries increased 5% in the second quarter of 2024 but scrap market tightness negatively impacted profitability.

According to the Finland-based company’s latest financial report, ‘the scrap market is expected to remain tight’ in the third quarter of 2024.