3/25/2025
LOOMING NICKEL DEFICIT WILL SEE SUPPLY HEAD OFF A CLIFF - BRAZILIAN NICKEL
A deficit in nickel outside the China-Indonesia supply chain is looming towards the end of the decade, Mark Travers, the chief executive officer of Brazilian Nickel told.
The situation will lead to a massive supply gap and necessitate a response sooner rather than later, he said.
Fastmarkets analysts forecast the nickel market to flip into a 39,000-tonne deficit in 2027, with increasingly large shortfalls each year thereafter. By 2034, Fastmarkets estimates an investment requirement for an additional 567,000 tonnes of nickel. Nickel was in a surplus of 164,000 tonnes in 2024, following a 179,000-tonne surplus in 2023.
Travers said the problem was being compounded by the fact that most Indonesian supply is committed to the Chinese mine owners under long-term offtake agreements.
Indonesian nickel production has expanded significantly in recent years and nation in Southeast Asia is on track to account for an estimated 60% of global nickel supply by 2025 and 75% by 2030.
Indonesia has become more proactive in managing mine supplies in recent weeks, announcing policies that are generally less-accommodating for rapid increases in production and therefore exports.
According to Travers, this approach was much-needed - in part because current nickel prices do not incentivize nickel supplies outside of Chinese-owned supply.
“The Chinese are willing to subsidize increased supply at the current price, whereas no ex-Chinese company, or very few, are going to do so unless they have a counter cyclical view of the future,” he said.
“This means Indonesia is probably not getting its fair shake in terms of that price, not just via processing, but through taxes, royalties and other opportunities,” he added.
At the same time, sustainable development policies are needed for the massive supply response that has taken place in Indonesia, Travers said.
According to Travers, industry analysts estimate that, at the current pace, Indonesia could exhaust its high-grade nickel in less than two decades.
“My understanding is that there are some price differences in the fine terms between a product that might be very high carbon and low ESG, and the cleaner products that are IRA compliant. But there's not a lot of IRA compliant material out there,” he added.
Under the IRA, companies that have a more than 25% ownership or control by a foreign entity of concern (FOEC) - including board seats, voting rights or equity - would not be eligible for the tax credits available under the IRA.
With FEOC nations being China, Russia, North Korea and Iran, that pretty much removes the majority of nickel being produced in Indonesia, because it has a Chinese shareholder base.
On the demand side, Travers said he was unfazed by a trend toward nickel-free lithium iron phosphate (LFP) and lithium manganese iron phosphate (LMFP) cathodes could result in reduced nickel consumption.
Travers also said that nickel's use in stainless steel remains strong and will continue to strengthen going forward.
“So, fundamentally, we believe nickel demand will settle in a very good place, and you still end up with a market that's in a deficit in the coming years,” he added.
Fastmarkets forecasts primary nickel demand to grow at a compound annual growth rate of 4.5% between 2023 and 2034, with growth in demand driven primarily by the batteries sector, followed by the stainless steel industry.