1 June 2023 – Will nickel production no longer keep up with demand from 2027? That is possible. But it is also possible, should there be even a small imbalance in supply and demand, that a possible oversupply of nickel will end as early as 2024. Germany’s inflation data unexpectedly better. European financial and commodity companies a major growth driver. And Chinese industrial companies are doing much better than anticipated.
Nickel in surplus until 2027?
According to a recent report, the Macquarie Group, Australian-based and world’s largest infrastructure asset manager, sees a possible global overproduction of nickel until 2027.
Lower annual production
But actual figures from the International Nickel Study Group (INSG), and Indonesia’s downward revision of annual production by almost 200,000 tonnes to just 1.45 million tonnes in 2022, could ultimately lead to a return to undersupply much sooner. Especially if the demand for batteries increases even further. And according to Macquarie, this is expected to at least quadruple by 2030.
Risk: Indonesia to account for 75% of global nickel production?
With the additional assumption that Indonesia could account for 75% of global nickel production from 2029 onwards, there will also be enormous pressure on the Indonesian government, especially in the field of electric driving, to push ahead with the sustainable and environmentally friendly mining of nickel. Moreover, such a concentration on Indonesian nickel would lead to a faster reduction of Indonesian nickel reserves and create a massive dependence on only one supplier.
Supply demand imbalance could lead to next undersupply
An only marginal imbalance in supply and demand could therefore lead to a massive undersupply, especially of Class I nickel, as early as 2024.
Germany’s inflation data for May unexpected positive
Germany’s inflation data for May brought unexpected positive news as the consumer price index showed a slight decline of 0.1 per cent compared to April. Furthermore, on a year-on-year basis, the inflation rate decreased from 7.2 per cent in April to 6.1 per cent in May. This welcome development can be attributed to the lower increase in energy and food prices. Encouragingly, Spain and France also experienced a greater decline in inflation rates than initially anticipated.
EU: Financial and commodity companies are the main growth drivers
According to a recent analysis by Deutsche Bank, financial and commodity companies are currently the main growth drivers in the European Union. Also, given the current macroeconomic environment, which points to higher inflation and interest rates in the longer term, financial and commodity stocks, which are important for the European equity market, should continue to generate robust returns.
China: Figures from industrial sector better than expected
Last week China presented figures for their first quarter. Sectors like communication, cyclical consumption and industrial sector reported an increase of 23% than the forecasted index level. The profits grew by 18% year on year and the turnover by 3%. However, a good half of companies listed in the MSCI had missed the expected earnings in the first quarter of 2023 while just under a third has surpassed the expected earnings. It is expected the Chinese economy gain the rhythm in the second half of the year and should lead to a revamped positive dynamic.
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