Nickel
Current market conditions as of 21/05/2025:
In Q2 2025, the nickel market continues to be under pressure from oversupply as nickel production remains in an upward trend, ensuring a steady surplus. Global nickel production in 2024 grew by 8% y-o-y, while consumption increased by 9%. Despite more dynamic consumption growth, the market has remained in surplus as production has exceeded demand over the past three years and dynamic consumption growth has only reduced the market imbalance.
Market sources believe the market will remain in surplus in Q2 2025 amid high competition between Indonesia and China. Indonesia maintains its leading position, accounting for more than half of the world's nickel production, having increased nickel output by 160% over the past five years. The main market for Indonesian nickel is exports, which fundamentally increases global supply. China is the largest consumer of nickel continues to increase nickel production following the growth in consumption and, in 2024, increased production by 10% y-o-y.
In the context of oversupply, nickel market prices are primarily sensitive to production costs. Thus, it is worth noting that in 2024 and early 2025 there were several price spikes, which were primarily the result of limited supply of nickel ore from Indonesia or the Philippines. In early 2025, the nickel ore market faced a deficit despite the overall saturation of the nickel market. The main reason was Indonesia, the world's largest nickel producer restricting ore mining due to delays in issuing export permits and an increase royalty from 10% to 14-19% in 2025. This reflected a shortage of raw materials for processing, forcing Indonesian nickel producers to import more than 330.000 tonnes of ore from the Philippines in March, which was 6 times more than in February. As a result, nickel ore prices rose in March-April, and nickel producers faced increased costs.
Forecasting insight
The price of LME nickel has been on a prolonged downtrend since spring 2022, reaching a low of USD 14,030/MT in early April 2025. This marks the lowest price point since August 2020. However, analysis from Expana suggests that prices may be nearing a bottom, and we could see a turnaround and rebound by Q3. Prices are expected to maintain higher levels in the latter half of 2025.
The extended decline in nickel prices has led to many nickel producers operating at a loss, resulting in unprofitable margins that are unsustainable. Consequently, high-cost operations have been idled, and numerous production facilities face closure. This situation creates a risk of reduced supply in 2025, which could lead to a price increase in late 2025. Such an increase would coincide with the typical seasonal price rise in Q3.
From a fundamental perspective, nickel prices are significantly undervalued. However, the current tariff situation suggests the market may remain bearish in the short term. We are closely monitoring definitive signals that may indicate a trend reversal and confirm that a price bottom is in place. Such confirmation would prompt a change in our hedging recommendations to account for the potential price increase.
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