The global nickel market is moving from surplus to deficit, Switzerland-based commodities giant Glencore said at its 2014 Investor Day in London.
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Director of Glencore's nickel commodity department, Kenny Ives, said the market was set to move from an 80,000 mt surplus in 2014 to a balanced market in 2015, with emerging deficits thereafter.
"Assuming the Indonesian ban on ore exports is sustained, market deficits will emerge," Ives said in a presentation.
He put annual demand growth at around 4.5% between 2014 and 2019 with global annual production growth at around 1% over the same period.
"With nickel demand growth projected at a conservative 4.5% per year, the market is expected to transition to deficit, with substantial deficits forecast from 2018," he said.
Ives said nickel had had a "roller coaster year" in 2014 with the price rallying from around $13,300/mt in January to around $21,200/mt in May -- up 52% from the start of the year.
"Prices subsequently settled in an $18,000-$20,000/mt range, then declined rapidly from September, along with commodities in general," he added.
Three-months nickel on LMEselect was trading at $16,490/mt at 1330 GMT Wednesday.
The increase in nickel prices was primarily driven by the Indonesian ban on nickel ore exports and the anticipation of reduced nickel output.
However, Ives said increases in LME inventories, Chinese metal exports, higher Philippine ore exports, macro-economic downgrades and liquidity issues in China had all impacted prices and sentiment in 2014.
LME warehouse nickel stocks increased from 260,706 mt January 2 to 407,568 mt Wednesday, according to LME warehouse data.
On the increase in Philippine ore exports Ives said: "It is clear that the Philippines have a smaller resource base than Indonesia."
He said that Philippine shipments will decrease in the coming months due to the monsoon season, and will not pick up materially until April when Surigao area exports resume.
Although China's nickel ore stockpiles -- blended with Philippine ore -- have supported continued high levels of Chinese nickel pig iron (NPI) production, Ives expected NPI production to fall in the near-term.
"Based on our projection of volume and composition of Philippine ore supply, China's NPI production is forecast to fall from 480,000 mt in 2014 to 400,000 mt in 2015 and 350,000 mt-400,000 mt over the outlook period [to 2019]," he said.
He said China's increasing dependence on lower grade ore from the Philippines will increase NPI production costs.
According to Glencore, primary nickel demand in stainless steel is projected to increase around 5% in 2014, reflecting growth in China, North America, Japan and India.
While demand from non-stainless applications is also robust with nickel usage projected to increase around 8% in 2014.