LME WEEK: Nickel market could stay in oversupply until 2030: Macquarie

The global nickel market is set to remain in surplus until 20230, driven by soaring supply growth from Indonesia as well as higher Chinese output, Jim Lennon, analyst at financial services group Macquarie, said during LME Week.

Indonesian production had risen from providing 30% of global nickel supply five years ago to 70% now, with nothing indicating a slowdown, Lennon added, describing fundamentals as bad for the global nickel market -- which has been in surplus since 2022.

Macquarie is expecting around 16% growth in Indonesian supply both this year and next, with growth spreading into non-nickel pig iron products such as mixed hydroxide precipitate that can be converted further into either nickel sulfate for the battery market or pure nickel for the LME market.

Total Indonesian nickel production will come to 2.4 million-2.5 million mt this year, but the installed capacity, at over 3 million mt/year, could reach 4 million mt by 2030, Macquarie forecasts. Already-announced high-pressure acid leach projects alone add up to over 1 million mt/year, compared with last year's HPAL production of 330,000 mt, the bank said.

However, nickel ore supply in Indonesia is coming under scrutiny from the country's government, which is reviewing the environmental permits of existing mines and has even seized a few of these assets, Lennon said. Also, the government has returned to a one-year approval system for mining, from a three-year one.

Government scrutiny

"We get the impression that the Indonesian government is looking at how they can control the market. So, towards the end of the year, we could go through a period where you see a number of mines being curtailed for environmental reasons and other mines not getting environmental permitting," said Lennon, adding that this is the only thing that could help the market out of surplus.

In Macquarie's base case projections, global nickel supply will grow despite the 500,000 mt production cuts in the rest of the world since 2022. "Output outside China and Indonesia is the lowest since 1990," said Lennon, adding that half the world's ferronickel production had been shut down.

"I don't think any market has ever been in surplus for nine years in a row, which is what we're currently forecasting. Normally, something happens to correct that," he said. "So far, we haven't seen that, but when you've got 70% of the supply in the hands of one country and policymakers in that country are scrutinizing what their policy should be, it leaves some room for doubt."

The nickel price fallen to a very low position on the cost curve, with the London Metal Exchange price bottoming out at $15,000/mt -- hovering around that level for most of 2025.

One thing supporting nickel prices has been Chinese imports, which have increased sharply this year, with Chinese apparent consumption of nickel rising by over 30% year over year. However, Macquarie thinks this has been driven by strategic stockpiling in China -- to well over 100,000 mt of nickel -- rather than underlying demand, which has slowed down the pace at which LME stocks have increased.

That said, at $15,000, 40% of the industry is still cash flow negative, which presents an unsustainable situation for the industry, according to Lennon.

Global demand for nickel will expand, Lennon said, but demand was also switching back to traditional driver stainless steel, as nickel use in batteries slows significantly.

"LFP [lithium iron phosphate] batteries are 50% plus cheaper than nickel-containing batteries. Nickel batteries will continue to grow, but only in high-end vehicles in our view," said Lennon.

About 65% of demand is generated by stainless steel, with the sector growing strongly, incentivized by cheap nickel -- a key ingredient in manufacturing stainless steel.

Turning to other regions, Lennon said Europe and North America, with its less than 10% share of the global primary nickel market, were not having much impact. Some 55%-60% of nickel production in Europe and the US uses recycled material, compared with only 15% in China and Indonesia, where the bulk of demand is covered by primary nickel, he added.