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COVID-19 to swell nickel, platinum surpluses; palladium deficit to shrink: Nornickel

London — Russia's Nornickel has revised its supply-demand outlook in light of the coronavirus pandemic and now expects much higher nickel and platinum surpluses than previously and a less severe palladium deficit.

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Nornickel has reduced its 2020 estimate of palladium consumption amid weaker global car sales, with January-February sales dropping 15% year-on-year. Global car sales may decline 6% overall this year, but platinum group metals (PGM) content per vehicle continues to increase, which should slightly offset the impact lower car production is going to have on PGM demand, it said.

Based on this, Nornickel now reckons global palladium consumption will decline 8% from the figure the company envisaged prior to the coronavirus outbreak, when it expected 1% year-on-year growth for 2020 palladium demand. Global palladium consumption is now seen at 10.6 million oz this year, down from the previously forecast 11.5 million oz.

The pandemic's negative implications on demand side will be partially offset by supply disruptions in South Africa, it said.

Nornickel reduced its 2020 estimate for palladium supply on restricted production at Amplats and power supply problems in South Africa. Amplats, or Anglo American Platinum, one of the world's largest PGM producers, declared force majeure last week and said it had temporarily shut down its Anglo Converter Plant. Before then, South Africa's PGM producers were adjusting operations affected by limited power supply from the country's utility company Eskom amid issues at its plants.

As a result, global palladium supply could reduce to 10.2 million oz this year, down 4% from 10.6 million oz expected for 2020 previously. Supply will remain in deficit, but the potential shortfall is now forecast at 200,000 oz and not 900,000 oz as expected previously, said Nornickel.

Platinum

Weaker global car sales also mean the platinum surplus is going to expand, according to Nornickel. The update in this forecast is also prompted by a weaker performance for Chinese platinum jewelry, output of which is expected to drop 30% this year.

Nornickel has reduced its estimate of 2020 platinum consumption to 7.5 million oz, down from the previous estimate of 7.9 million oz. This potentially doubles the market surplus to 0.6 million oz relative to the previous forecast.

Nickel

In China, the epidemic that ripped through the country in January-February has had limited impact on nickel supply and demand. A slight decline in nickel pig iron (NPI) output in China over January-February was offset by doubled NPI supply from Indonesia, although consumption of high-grade nickel (Class-I) declined due to it being substituted by NPI.

For the world nickel market, a weaker global macroeconomic environment means demand is set to stagnate. While China is expected to strongly recover in Q2, Europe and the US are reducing or putting on hold industrial operations and this presents a major downside risk.

Lower oil prices also mean lower nickel demand from alloys and stainless steel plants, noted the company.

Given all these, Nornickel has canceled its previous 3% growth forecast for 2020 and expects global consumption at 2.45 million mt of nickel, down from 2.54 million mt in the previous forecast.

Primary nickel production in 2020 is expected to remain largely unaffected, at 2.56 million mt. Nickel supply surplus could swell to 108,000 mt, up from a pre-pandemic surplus estimate for this year of 42,000 mt.

Copper

Coronavirus' influence on copper production and consumption in China and Europe may be moderate.

Consumption in China is expected to be 1%-4.5% lower (averaging at 13.4 million mt) than the initial 2020 estimate, while production in China is seen 4% below the previous forecast at 9.32 million mt.

Copper consumption in Europe is seen decreasing by 1% to 3.65 million mt, while production could be unaffected.

For the global copper market, Nornickel expects an overall neutral impact. The company revised its forecast of global consumption 1.2% lower to 23.67 million mt.

Supply cuts in Peru and Canada are posing a downside risk to production in the ex-China world. This coronavirus-caused supply response and logistical issues are likely to bring global copper production 1.4% below the initial forecast to 23.73 million mt.

Overall, supply and demand will be largely balanced with an moderate surplus, Nornickel said.