Mining

Indonesia, China to Cut Nickel Output as EV Metal Loses Sheen

 

Two of the world’s top nickel producing countries, Indonesia and China, are planning output cutbacks this year to cap losses from the slide in the electric vehicle battery metal’s prices.

Nickel prices had surged in 2022, peaking at a record above $100,000 after expectations of reduced supplies from major producer Russia following its invasion of Ukraine.

Now, the metal is trading around $16,000 a ton after production rose in Indonesia, which last year accounted for more than half of global mined supplies, estimated at around 3.4 million metric tons.

 

Also on AF: Western Investment Banks Brace for Job Cuts as China Woes Rise

 

Amid the slide in nickel prices, Indonesia is now set to reduce the metal’s output by at least 100,000 metric tons seek to limit losses.

China, the seventh largest nickel producer in the world, is mulling similar production cuts this year.

Traders and analysts say further cuts would be needed if producers wanted to boost prices and remove the surplus from the market, rather than just halt losses.

Cuts so far have removed more than 230,000 tons or around 6% of potential supply for this year, according to Macquarie analysts. This was not enough to boost prices.

 

More cutbacks needed

Cuts so far have removed more than 230,000 tons or around 6% of potential supply for this year, according to Macquarie analysts. This was not enough to boost prices.

Consultancy Benchmark Mineral Intelligence estimated cuts of more than 250,000 tons were needed to balance the global nickel market this year.

Most of the oversupply and high inventories are in nickel pig iron (NPI), a cheaper alternative to high-grade nickel for the production of stainless steel, analysts said. China and Indonesia account for 70% of global supplies of nickel, most of it NPI.

“If we take out the 3% disruption allowance or 100,000 tons, around another 100,000 tons needs to be cut to balance the market,” Jim Lennon, a strategist at Macquarie, said.

“With the NPI price around $11,000 (a ton), there should be supply adjustments in China and Indonesia,” he added.

Lennon estimated that NPI production costs are $10,000-$11,000 a ton and $12,000 a ton in Indonesia and China respectively, meaning it is very hard to make a profit.

With raw material costs, including nickel ores, electricity and coal, making up to 73% of NPI prices, many NPI mills in China have become unprofitable, according to Bank of America analysts.

 

  • Reuters, with additional editing by Vishakha Saxena

 

Also read:

 

Shanghai Exchange Looking at Nickel Futures, May Rival LME

 

Nickel’s $100k Spike on Short Squeeze Prompts Trading Halt

 

Indonesian Exports Could Hit $280bn as Nickel Shipments Rise

 

Indonesia’s Vale, China Firm Sign $2bn Nickel Plant Deal

 

 

Vishakha Saxena

Vishakha Saxena is the Multimedia and Social Media Editor at Asia Financial. She has worked as a digital journalist since 2013, and is an experienced writer and multimedia producer. As a trader and investor, she is keenly interested in new economy, emerging markets and the intersections of finance and society. You can write to her at vishakha.saxena@asiafinancial.com

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