Goldman Sachs lifts nickel price forecast to US$22,000/t as supply woes continue

Goldman Sachs nickel price forecast US$22,000:t supply issues Indonesia ban Philippines market
Goldman Sachs has raised its 12-month forecast for nickel due to supply concerns from Indonesia's imminent export ban.

The ongoing US-China trade feud has managed to keep many commodities like copper down, but its vice-like grasp on nickel is loosening with the metal’s price rocketing almost 80% since the start of the year – driven by supply concerns out of Indonesia and diminishing stockpiles.

Helping the metal put on a growth spurt this week was news the world’s largest nickel producing nation Indonesia will be banning nickel exports from January next year – two years ahead of schedule.

The ban caused nickel to surge to US$18,620/t on Monday before dipping to US$17,900/t overnight.

Goldman Sachs nickel price forecast chart 2019
The nickel price has risen almost 80% since the start of 2019.

Soaring nickel prices and supply woes have now prompted Goldman Sachs to up its 12-month nickel forecast from US$16,000/t to US$22,000/t.

Indonesia’s nickel export ban

Indonesia’s Energy and Mineral Resources Ministry director Bambang Gatot Ariyono said the country would begin transitioning to this ban over the next four months – with current Indonesian producers to fulfil all export contracts before the ban sets in on the 1 January.

Mr Bambang said the decision was to ensure security of the country’s nickel reserves.

He explained Indonesia’s proven reserves amount to 698Mt, which will supply the country’s ore refining facilities for a little more than seven years.

“The government needs to take anticipatory steps so that the age of the reserves can meet the economic age of the smelter,” he stated.

Mr Bambang added Indonesia planned to use its nickel and other minerals to produce lithium-ion batteries domestically to feed the country’s strategy to boost the amount of electric vehicles on its roads.

Philippines mine closure

Adding to global nickel supply woes are rumours major nickel miner from the Philippine’s SR Languayn Mining Corp will be shutting down later this year as ore deposits are depleted.

SR Languayn currently exports up to 400,000t of nickel a month and its mine closure will remove this from global supplies.

However, other nickel miners in the Philippines plan to increase production next year to mitigate some of the production loss from Indonesia and Languayn.

Widening market deficit

In 2018, Indonesia’s nickel output hit 560,000t – with about 2Mt produced annually worldwide.

Primary global nickel production was 2.18Mt in 2018 and is expected to grow to 2.38Mt this year.

The International Nickel Study Group pointed out the market was in a deficit of 146,000t last year, with an 84,000t gap expected this year.

With Indonesia’s export ban being brought forward, a much larger than anticipated deficit for next year may be looming with about 10% of global supply expected to be removed.

The deficit comes at a time when stockpiles on the London Metal Exchange represent only two months’ supply – hovering around 150,000t since July.

Meanwhile, strengthening steel demand and the emerging electric vehicle sectors are continuing to pressure the market.