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Reuters
6 days ago
- Business
- Reuters
Nickel oversupply to persist on expansion, slower demand growth, industry experts say
JAKARTA, June 5 (Reuters) - Oversupply in the global nickel market is expected to persist over the next few years given production capacity expansion and slower growth in demand for the metal used in batteries and stainless steel, speakers at an industry event said this week. A surge in new nickel supply in Indonesia, the world's biggest producer with a market share of about 63%, has led to benchmark prices halving over the past three years. "The market is in oversupply, and in Indonesia, several projects in the pipeline will be completed soon, increasing production capacity," Macquarie analyst Jim Lennon told an industry conference organized by Shanghai Metals Market in Jakarta. Lennon expects the surplus to continue until 2027-2028. The most-traded nickel contract on the London Metal Exchange traded at $15,380 per metric ton as of 0400 GMT on Thursday, after touching a five-year low of $13,865 on April 7. Nickel hit a record high above $48,000 a ton in early 2022. Lennon said the $15,000 level is key for industry costs. After production cuts began in 2022-2023, half of existing producers are at risk if prices fall below that level, he said. Meanwhile, nickel demand growth has been weighed down by the surge in use of cheaper lithium iron phosphate batteries. The analyst has cut his estimate for the battery sector's nickel demand in 2030 to 967,000 tons, compared with an industry consensus forecast for 1.5 million tons two years ago. The battery sector consumed 518,000 tons of nickel last year. Denis Sharypin, strategic marketing director at Russia's Nornickel, said prices pushed down by oversupply mean that about one-fourth of nickel producers globally are making losses on a cash-cost basis. Indonesian smelters of nickel pig iron, an alloy used in stainless steel, have also been battling compressed margins, said Steven Chen, global sales head at Eternal Tsingshan Group Ltd, part of China's Tsingshan Holding Group. "Smelters are really struggling, which may lead to reductions in production, and widespread cutbacks or shutdown in some of the smaller smelting operations may be in a not-distant future," Chen said. Indonesia's mining minister has said the government will manage nickel ore supply and demand to support prices.
Yahoo
04-03-2025
- Business
- Yahoo
Indonesia's Nickel Boom Is Forcing Its Own Smelters to Shut Down
(Bloomberg) -- Indonesia's sprawling nickel industry is creaking under the weight of its own success, as a production surge drags down prices and a shortage of ore forces even the country's own smelters to curb output. Cuts to Section 8 Housing Assistance Loom Amid HUD Uncertainty How Upzoning in Cambridge Broke the YIMBY Mold Remembering the Landscape Architect Who Embraced the City NYC Office Buildings See Resurgence as Investors Pile Into Bonds Hong Kong Joins Global Stadium Race With New $4 Billion Sports Park The Southeast Asian nation's metal boom over the past decade has convulsed the industry, catching many off-guard with its speed and scale. Cheap coal-based power and Chinese technology that makes the most of bountiful low-grade reserves have helped Indonesia to control more than half of the world's nickel production — a win for Jakarta governments eager to boost manufacturing. The surge prompted a two-year price plunge that has crippled global rivals. With the metal now languishing near its lowest levels since 2020, the effects are now being felt at home, too. Weaker-than-expected demand from key markets like China and ore shortages are adding to the pain in the country's smelting sector. 'Previously everyone was getting two-year paybacks on their smelting investments,' said Jim Lennon, a veteran metals analyst at Macquarie Group Ltd. 'There's no money in the industry for them now.' PT Gunbuster Nickel Industry — one of Indonesia's largest smelters with more than 20 production lines for nickel pig iron, a precursor for stainless steel — has delayed payments to suppliers and is close to shutting down completely amid the collapse of its Chinese parent Jiangsu Delong Nickel Industry Co., Bloomberg reported last month. Gunbuster said in a statement last week that its operations continue to run as normal during 'changes in operational management.' It did not elaborate. In Java, Indonesia's most populous island, several smaller smelters have cut production to minimal levels or stopped altogether, according to a person familiar with the matter. The plants, hundreds of miles from the nickel mining heartland of Sulawesi, face additional costs to ship in ore. But even facilities near mines are facing difficulties, including those in the massive purpose-built industrial parks run by China's Tsingshan Holding Group Co., the world's largest nickel producer. Australian-listed Nickel Industries Ltd, with several smelters in the conglomerate's parks, posted a full-year loss after taking a $205 million post-tax impairment. The current state of affairs is a far cry from just a few years ago, when Indonesia banned the export of ore and lavished firms with tax holidays to build up a domestic smelting industry. The breakneck expansion — driven almost entirely by Chinese companies — was touted as a winning push to turn the country's natural resources into higher value exports, dubbed 'downstreaming'. While the policies did boost Indonesia's export earnings and created thousands of jobs, the surge in processing capacity has far outpaced demand for nickel. The country is now looking to curb its mine supply in an effort to support the market — a move with grave consequences for producers. 'More than half of the nickel pig iron furnaces are not making money or are losing money,' said Macquarie's Lennon. 'If you have got a smaller furnace and have to buy your ore, you are not making money.' The rush to invest in the Indonesia nickel sector was spurred on by the rise of electric vehicles, which need nickel for high-performance batteries. But advances made by Chinese firms have seen the metal being displaced by cheaper battery chemistries, in particular those based on lithium iron phosphate. Meanwhile consumption by the stainless steel sector, the biggest source of nickel demand, is still attempting to turn the corner after suffering through China's prolonged property slump. Without a sustained increase in appetite — perhaps driven by stimulus from Beijing — Indonesia's smelters face more pain this year. 'There are some bright spots for demand in the stainless steel market, but nickel batteries are losing market share in the electric vehicle market,' Dan Smith, head of research at Amalgamated Metal Trading Ltd., wrote in a note, predicting bearish pressure ahead for at least the next six months. 'There is more pain to come for producers before the market rebalances.' --With assistance from Alfred Cang. (Removes AI summary due to incorrect reference to Gunbuster) Rich People Are Firing a Cash Cannon at the US Economy—But at What Cost? The US Is Withdrawing From Global Health at a Dangerous Time Trump's SALT Tax Promise Hinges on an Obscure Loophole Snack Makers Are Removing Fake Colors From Processed Foods OXO Fought Back Against the Black Spatula Panic. People Defected Anyway ©2025 Bloomberg L.P.
Zawya
25-02-2025
- Business
- Zawya
China's grip on global nickel supply tightens with Anglo sale: Andy Home
LONDON - Anglo American's sale of its Brazilian nickel business to China's MMG Ltd is a corporate win-win. Anglo gets to deliver on its promise to shareholders to simplify its portfolio and pockets up to $500m. MMG, which is already a major producer of copper, cobalt and zinc, gets to diversify into another metal and expand its geographic footprint into Brazil. It is also buying into the one part of the nickel market that is showing signs of price resilience amid a glut of over-supply. But it's not such good news for Western countries looking to escape China's tightening grip on the global nickel supply chain. Chinese companies already control around 75% of refining capacity in Indonesia, which has rapidly emerged as the world's largest supplier. And with two other Western producers looking to offload their nickel operations due to low prices, China's market dominance could yet grow further. PRICE DEVASTATION Anglo's Brazilian assets comprise two mines and two processing plants with annual combined capacity of 40,000 metric tons of nickel. Both plants produce ferronickel for the stainless steel sector, which is still the largest consumer of nickel despite the metal's growing use in electric vehicle batteries. This segment of the nickel market was the first to feel the full force of Indonesia's production boom, which initially came in the form of a competitor stainless steel input called nickel pig iron (NPI). Such Class II nickel products always trade at a discount to the high-purity Class I refined metal traded on the London Metal Exchange (LME) But Indonesia's production surge caused the discount to LME prices to balloon from an average 8.4% in 2001 to 27.2% in 2023, according to MMG's investor presentation on the deal. It was a double whammy for Class II producers since the LME price was simultaneously collapsing. Around half of the world's ferronickel production outside of China and Indonesia is now suspended, according to Macquarie Bank analyst Jim Lennon. CARBON EDGE Anglo's Brazilian operations are among the survivors. They are low-cost and still cash-flow positive despite the collapse in the London Metal Exchange (LME) nickel price to four-year lows below $16,000 per ton. Anglo's ferronickel sells at a premium relative to other Class II products due to its quality and green credentials relative to Indonesian NPI. Carbon footprint is assuming greater significance in the stainless sector. The European Union's Carbon Border Adjustment Mechanism, which will tax higher-carbon imports, is due to come into force next year. TURNAROUND Even as the LME nickel price has continued sinking under the weight of rising inventory, much of it Chinese and Indonesian, the Class II market has turned. The discount to the LME nickel price narrowed to an average 25% over the first half of last year, according to MMG. That for Anglo material tightened to 15.9% from 20.8% in 2023. Supply has been constrained both by the mass closure of capacity in the West and a change of product mix in Indonesia. Many Indonesian operators have switched their furnaces from producing NPI for the stainless steel sector to producing either nickel matte or mixed hydroxide for the battery sector. Macquarie's Lennon estimates the Class II market was at best balanced last year as Indonesian surplus transferred to the Class I segment of the market. The glut is now all too visible in the form of LME warehouse stocks, which more than doubled last year and have risen another 30,000 tons to 192,828 tons so far this year. STRATEGIC METAL MMG is betting the supply glut won't last beyond this decade, when a combination of steady growth in global stainless steel production and exponentially higher demand from the battery sector will create supply deficits. If so, the company will be well positioned to reap the rewards. Anglo's nickel assets sit on the world's third largest resource of the metal, capable of transforming MMG into one of the world's largest producers outside of Indonesia. And although the Brazilian operations currently produce ferronickel, that doesn't mean they couldn't go down the Indonesian route and be reconfigured to produce battery inputs. China is evidently still taking a strategic view of nickel, even though it has lost much of its battery metal lustre in the West. Brazil's Vale has just booked a $1.4 billion impairment against its Thompson nickel operations in Canada and launched a strategic review of the business. It's unlikely the Canadian government would tolerate Chinese ownership but Thompson is not the only nickel asset up for grabs. Australian miner South32 is also looking to sell its Cerro Matoso ferronickel operations in Colombia "in response to structural changes in the nickel market," it said in its Q4 2024 report. Those structural changes have been wrought by Chinese investment in Indonesia. The resulting supply tsunami and price collapse means China can now double down on its long-term bet that nickel is still a critical metal for the energy transition. The opinions expressed here are those of the author, a columnist for Reuters (Editing by David Evans)
Reuters
24-02-2025
- Business
- Reuters
China's grip on global nickel supply tightens with Anglo sale
LONDON, Feb 24 (Reuters) - Anglo American's (AAL.L), opens new tab sale of its Brazilian nickel business to China's MMG Ltd ( opens new tab is a corporate win-win. Anglo gets to deliver on its promise to shareholders to simplify its portfolio and pockets up to $500m. MMG, which is already a major producer of copper, cobalt and zinc, gets to diversify into another metal and expand its geographic footprint into Brazil. It is also buying into the one part of the nickel market that is showing signs of price resilience amid a glut of over-supply. But it's not such good news for Western countries looking to escape China's tightening grip on the global nickel supply chain. Chinese companies already control around 75% of refining capacity in Indonesia, which has rapidly emerged as the world's largest supplier. And with two other Western producers looking to offload their nickel operations due to low prices, China's market dominance could yet grow further. PRICE DEVASTATION Anglo's Brazilian assets comprise two mines and two processing plants with annual combined capacity of 40,000 metric tons of nickel. Both plants produce ferronickel for the stainless steel sector, which is still the largest consumer of nickel despite the metal's growing use in electric vehicle batteries. This segment of the nickel market was the first to feel the full force of Indonesia's production boom, which initially came in the form of a competitor stainless steel input called nickel pig iron (NPI). Such Class II nickel products always trade at a discount to the high-purity Class I refined metal traded on the London Metal Exchange (LME) But Indonesia's production surge caused the discount to LME prices to balloon from an average 8.4% in 2001 to 27.2% in 2023, according to MMG's investor presentation on the deal. It was a double whammy for Class II producers since the LME price was simultaneously collapsing. Around half of the world's ferronickel production outside of China and Indonesia is now suspended, according to Macquarie Bank analyst Jim Lennon. CARBON EDGE Anglo's Brazilian operations are among the survivors. They are low-cost and still cash-flow positive despite the collapse in the London Metal Exchange (LME) nickel price to four-year lows below $16,000 per ton. Anglo's ferronickel sells at a premium relative to other Class II products due to its quality and green credentials relative to Indonesian NPI. Carbon footprint is assuming greater significance in the stainless sector. The European Union's Carbon Border Adjustment Mechanism, which will tax higher-carbon imports, is due to come into force next year. TURNAROUND Even as the LME nickel price has continued sinking under the weight of rising inventory, much of it Chinese and Indonesian, the Class II market has turned. The discount to the LME nickel price narrowed to an average 25% over the first half of last year, according to MMG. That for Anglo material tightened to 15.9% from 20.8% in 2023. Supply has been constrained both by the mass closure of capacity in the West and a change of product mix in Indonesia. Many Indonesian operators have switched their furnaces from producing NPI for the stainless steel sector to producing either nickel matte or mixed hydroxide for the battery sector. Macquarie's Lennon estimates the Class II market was at best balanced last year as Indonesian surplus transferred to the Class I segment of the market. The glut is now all too visible in the form of LME warehouse stocks, which more than doubled last year and have risen another 30,000 tons to 192,828 tons so far this year. STRATEGIC METAL MMG is betting the supply glut won't last beyond this decade, when a combination of steady growth in global stainless steel production and exponentially higher demand from the battery sector will create supply deficits. If so, the company will be well positioned to reap the rewards. Anglo's nickel assets sit on the world's third largest resource of the metal, capable of transforming MMG into one of the world's largest producers outside of Indonesia. And although the Brazilian operations currently produce ferronickel, that doesn't mean they couldn't go down the Indonesian route and be reconfigured to produce battery inputs. China is evidently still taking a strategic view of nickel, even though it has lost much of its battery metal lustre in the West. Brazil's Vale ( opens new tab has just booked a $1.4 billion impairment against its Thompson nickel operations in Canada and launched a strategic review of the business. It's unlikely the Canadian government would tolerate Chinese ownership but Thompson is not the only nickel asset up for grabs. Australian miner South32 ( opens new tab is also looking to sell its Cerro Matoso ferronickel operations in Colombia "in response to structural changes in the nickel market," it said in its Q4 2024 report. Those structural changes have been wrought by Chinese investment in Indonesia. The resulting supply tsunami and price collapse means China can now double down on its long-term bet that nickel is still a critical metal for the energy transition. Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
