Nickel surpluses - what are they all about?
Nickel surpluses – what are they all about?

24 June 2024 – According to the World Bureau of Metal Statistics (WBMS), almost 97.5% of the world’s refined nickel production was consumed directly from January to April 2024. Just 2.5% could be allocated to so-called surplus production, which corresponds to around 31,000 MT of nickel. But is this surplus available at all?

Nickel surpluses – what are they all about?

According to the World Bureau of Metal Statistics (WBMS – part of the London Stock Exchange Group LSEG), almost 97.5% of global refined nickel production was consumed directly from January to April 2024. Just 2.5% could be allocated to so-called surplus production, which corresponds to around 31,000 MT of nickel. Unfortunately, the WBMS does not seem to have indicated in its latest announcement which nickel products – Class 1 or Class 2 – are involved.

Surplus production does not equal higher availability

Looking at the nickel stocks on the London Metal Exchange (LME) and the tonnage of Russian nickel, which has remained almost constant since January 2024 (approx. 24,500 MT) and thus also the share of the LME total nickel stock of approx. 34% and this in connection with the surplus production of 31,000 MT, ultimately only 20,000 MT of additional production remains, which is estimated to be of non-Russian origin.

Stocks on the LME should be treated with caution

This also makes it clear that the LME inventories, which have recently been used time and again to point to alleged surplus production, are grossly inflated and should actually be corrected downwards by at least 24,000 MT, which would have put them at just under 55,000 MT at the end of May.

No further increase is to be expected in these stocks originating from Russia, as the LME and CME have been banned from trading Russian nickel from production after 12 April 2024. This is why the LME has also shown this separately in its inventory report since the May report.

Class 1 and class 2 nickel not sufficiently available?

Of course, this is now only related to class 1 nickel (99.8%+ Ni content). Important producing countries, such as New Caledonia or Indonesia, which primarily produce Class 2 nickel, are currently either completely out of production or are unable to keep up with the approval procedures for new mining licences or have a growing problem with the availability of ore and are now even dependent on imports from the Philippines. The International Nickel Study Group (INSG) has also already been forced to significantly reduce its forecasts for possible nickel surpluses.

In 2022, Goldman Sachs analysts had forecast a renewed deficit in nickel availability from 2025.

Buying the Oversupply and Selling the Shortages

The current price volatility and the constantly repeated arguments that nickel is in surplus production could soon prove to be an attempt by speculators to quickly buy nickel at a favourable price before the world falls into a full-blown deficit of the important battery and stainless steel raw material. A truth that was already presented in 2014 at the UN Trade & Development (UNCTAD) Multi-Year Expert Meeting on Commodities and Development in relation to nickel and copper: “… Buying the Oversupply and Selling the Shortages.”

However, there is not much oversupply available for nickel.

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