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Brighter times ahead for nickel, experts say

A recovery in the nickel market in the wake of the coronavirus pandemic is being forecast by analysts, but they caution it could take until 2022 for a return to 2019 price levels.

Trade in nickel and the global economic situation was discussed during an online forum organised by the Bureau of International Recycling and its stainless steel and special alloys committee.

The opening speaker was Natalie Scott-Gray, a UK-based nickel specialist with INTL FCStone, who said ‘nickel prices were a world apart from pre-virus levels’. Prior to the crisis, the projected average nickel price for 2020 was projected to be US$ 17 100 per tonne, up 17% on 2019. However, the actual Q1 2020 price was US$ 12 765 while the current 2020 average was US$ 12 043. She added that 3% of total production was lost in Q1 with a 4% loss forecast for Q2. Her projected market mean nickel prices were US$ 12 452 per tonne in 2020 and US$ 13 318 in 2021.

Weak recovery

It was clear that stainless steel production was severely hampered by lockdown measures in China. Total stainless steel stocks in China rose by 50% in the first two months of 2020, approaching 3Mt. ‘A V-shape recovery in China is not expected and recovery in the rest of the world is forecast to be weak,’ the analyst told the forum.
China’s year-on-year production of stainless steel was down 12% in Q1 and likely to be 11% down in Q2. The quarterly comparisons for the rest of the world were 7% (Q1) and -14% (Q2).

Demand from EV sector

Scott-Gray said the growth of the battery market ‘had stumbled but recovery would be swift’. Demand for nickel in the use in electric vehicle batteries is forecast to fall by 28 000 tonnes this year but recovery would be robust, with an average growth of 37% over the next five years. Even so, end use of nickel in batteries only makes up 4% of the total market.
‘Despite aggressive projections for nickel demand from the EV sector, we forecast that the stainless steel industry will continue to be the largest nickel consumer and therefore the main nickel price driver in the short to medium term,’ she said. By 2030, the end use of nickel would be 46% for stainless steel and 37% for batteries.

Gradual recovery

The second speaker was futurist and economist Jason Schenker, president and founder of Prestige Economics in the US. He aggregated recent PMI surveys, including the privately commissioned Caixin index for China and said both purchasing and manufacturing indices suggested a gradual recovery by the end of the year. He argued the implication for stainless steel was that the market would take two years to recover to the levels seen in late 2019.

Schenker expected LME nickel prices to be around US$ 13 000 this year, US$ 15 000 in 2021, and US$ 16 000 in 2022. ‘Long-term demand [for nickel] will be strong but touch and go this year,’ he concluded.

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