S&P Global Market Intelligence expects that the negative macroeconomic impact of the novel coronavirus outbreak, which was declared a global pandemic March 11 by the World Health Organization, will derail the 2020 nickel bull market story that was anticipated to result from this year's Indonesian nickel ore export ban. The massive response by central banks and governments to counter the pandemic's impacts on global economic growth, including the recent emergency interest rate cuts and quantitative easing packages announced by the U.S. Federal Reserve and the Bank of England, has failed to reduce risk aversion among investors around the implications of the pandemic. Other bearish factors, such as the crude oil price collapsing to an 18-year low and high London Metal Exchange nickel stocks, have contributed to the LME three-month nickel price dropping by 11.4% month over month March 19 to US$11,225/t, the lowest price since June 2019.
- S&P Global Ratings expects the pandemic to push the global economy into recession in 2020, with global GDP growth now forecast at just 1% to 1.5%. As a result, we have dropped our forecast for 2020 global primary nickel consumption by 231,000 tonnes. We have also lowered our 2020 global primary nickel production forecast by a smaller amount, 151,000 tonnes, due to anticipated logistical and transportation issues that will put downward pressure on supply.
- We, therefore, expect the global primary nickel market to move from a deficit of roughly 30,000 tonnes in 2019 to a small surplus of 11,000 tonnes in 2020, compared with previous expectations for the market to move to a wider deficit of 69,000 tonnes in 2020. As a result, we have slashed our 2020 average LME three-month nickel price forecast from US$14,753/t to US$12,036/t, representing a fall of 13.8% year over year from the 2019 average price.
- S&P Global Ratings expects the Chinese economy to begin recovering in the second half of 2020. This will provide support to fundamentals and prices, enabling the average nickel price to rise to US$12,913/t in 2021.
- Risks nevertheless remain that the coronavirus pandemic will continue to spread globally at a fast pace and have a prolonged impact on global nickel demand and supply.