Views of global nickel production in 2022 are spread across the board, with market analysts either viewing a surplus, deficit or balanced output in the face of robust demand and supply.
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The global nickel market is expected to see surplus of 76,000 mt in 2022, from a deficit of 134,000 mt in 2021, the International Nickel Study Group (INSG) said.
World primary nickel production is forecast to reach 3.12 million mt in 2022, a rise of around 10% from 2021, while demand is seen at 3.044 million mt in 2022, an increase of about 18% from 2021, INSG said.
Indonesia, the world's top nickel producer, is currently expanding its domestic nickel industry, aided by new high-pressure acid leaching (HPAL) projects, Commerzbank's commodities analyst Daniel Briesemann said in a note.
"However, there is a degree of uncertainty in these [supply] figures, especially with regard to Chinese and Indonesian production," INSG added. "The estimates do not include any adjustment factor for possible production disruptions."
Indonesia and the Philippines are the world's top two producers, but major deposits are also mined in Australia, Canada, Brazil, Canada, China and Russia.
Pivotal role in energy transition
Nickel is set to play a pivotal role in energy transition due to the growing market for nickel-cobalt-aluminum batteries used in electric vehicles, and as a result mothballed or abandoned mining projects have experienced a renaissance, Briesemann said.
"Investments are also being made in new production capacity further along the value chain. For example, new plants for the production of nickel pig iron (NPI) are being built in Indonesia," Commerzbank's analyst said.
Russian Nornickel — the world's largest producer of high-grade nickel and palladium, major producer of platinum and copper — said surging Indonesian nickel pig iron (NPI) production will be the main driver of supply growth in 2022.
"However, if there are renewed restrictions in Indonesia to combat coronavirus, the expected production growth is probably overestimated," Briesemann said.
Additionally, recent power cuts in China have resulted in further declines in nickel output, while Covid-19 restrictions continue to impact production in Indonesia and New Caledonia, Macquarie analysts said.
Australian multinational bank ANZ said in a note that, in the fourth quarter of 2021, the high amount of energy needed and the carbon intensity of NPI weighed on China's NPI output, led to China increasing imports of NPI and refined nickel.
Nornickel sees swing to surplus
Nornickel said it expects in the global nickel market a surplus of 59,000 mt in 2022, swinging from a 149,000 mt deficit in 2021.
The 2021 deficit was caused by 17% growth in global nickel demand — driven by the stainless-steel sector, which accounts for just over 70% of all nickel demand, and batteries — with the drop in the company's own production in 2021 also a key factor.
ANZ said that, while Indonesia and the Philippines were adding incrementally to global supply, supply risks in both countries are expected to be high due to regulatory changes.
Indonesia is expected to face pressure to reduce the environmental impact of production, as the majority of its nickel industry uses coal-fired power, the Australian bank said.
At COP26 last year, the Indonesian government signed up to a pledge to end coal use, though also not supporting a clause calling to stop construction and financing of new coal-fired power stations, ANZ said, adding that China also committed not to build coal-fired plants overseas.
"So, even with a plentiful pipeline of projects to increase production to 1 million mt, the carbon footprint of coal-powered plants in Indonesia may put off manufacturers of batteries and electronic vehicles who are chasing a green nickel supply," ANZ said.
"Authorities are also exploring the possibility of taxing nickel product exports of less than 70% nickel content, to grow domestic processing. This could be another nickel supply headwind in 2022," it said.
ANZ said it is likely that demand for nickel for the production of stainless steel and non-stainless steel will hold up in 2022, which will keep the market largely balanced this year, leaving little room for currently depleted inventories to be restored.
TD Securities analysts expect a minor deficit in 2022, though the delicate supply-demand balance could be tested by a potential for Indonesia to ban exports of various nickel product, or the imposition of a tax, as noted by ANZ.
"These policies remain highly uncertain, but the risk is on traders' minds considering that government ministers have historically come through on their suggestions surrounding taxes or bans on exports of certain mineral products," TD Securities said.
"However, given the elevated number of high value investments underway and planned, it's not clear that such a restrictive policy will take effect," the Canadian investment bank said.
UK broker Liberum's 2022 nickel forecast is $16,600/mt, TD Securities forecast is $19,313/mt, Macquarie, $19,375/mt, ANZ $21,000-$21,500/mt, while Commerzbank sees nickel prices reaching $22,000/mt by the end of this year.
The London Metal Exchange three-months spot nickel price was trading at $20,300/mt ($9.21/lb) as of 1120 GMT Jan. 6.