Nickel prices continue to rise sharply as demand for the metal peaks against shrinking inventories worldwide.
The double demands of stainless steel and lithium-ion batteries have increased nickel purchases, while at the same time stocks held in London Metal Exchange (LME) warehouses decreased.
LME inventories are currently at their lowest since late 2019, with stocks halving in the last five months.
This has pushed the LME cash nickel price up to US$22,175 per tonne, which is up from mid-December where it attracted US$19,330/t.
LME warehouses currently have 99,462t of nickel in stock.
Explorers benefit from rising nickel prices
Explorers have been benefitting from the rising nickel price, as investors clamour to take a position in the metal.
Lunnon Metals (ASX: LM8), which owns the Kambalda nickel project in Western Australia has seen a 30% increase to its share price over the past month.
Fellow nickel explorer Estrella Resources (ASX: ESR) is up 16% over the same period. Estrella is exploring the Carr Boyd project in Western Australia. Recent ASX debutant Dundas Minerals (ASX: DUN) restarted its maiden drilling program at its namesake project in the Albany-Fraser Orogen in WA after the Christmas break. Dundas was trading 2.7% higher for the week.
South East Asia focused Blackstone Minerals (ASX: BSX) is up 20% for the month as it progresses its Ta Khoa nickel project in northern Vietnam and downstream refinery plans.
Azure Minerals (ASX: AZS) has seen its share price rise 15% over the last month as it continues to hit more nickel and copper while drilling its Andover project in WA.
Short-term demand tipped to weaken
Market researcher and analyst, Fitch Solutions has predicted nickel prices to rise steadily over the 2023 – 2027 period, however the analyst sees prices weakening in the short term.
According to the agency, the first half of 2022 will see a drop in nickel value as factors affecting the current tightness ease and prices will average to US$17,000/t.
China, producer of around two thirds of all global steel, is currently cutting stainless steel production to carry out maintenance and this lowered output will continue with the Chinese New Year as the population takes holidays.
Steel manufacturers have also been asked to lower output during the Beijing Winter Olympics which runs from 4 February to 20 February 2022.
Analysts predict that stainless steel producers will continue to carry out maintenance in the first quarter.
Expanded production to ease short-term supply issues
At the same time refined nickel production is expected to increase with Indonesia and Philippines ramping up production, which is predicted to ease supply issues.
Data analytics and consulting company GlobalData associate project manager Vinneth Bajaj says the expansion of Indonesia’s nickel industry, the resumption of production at various mines in the Philippines and the ramp up at the Santa Rita mine in Brazil, which was previously halted in 2015, will help store up stock.
The Araguaia Nickel project in Brazil is expected to commence in 2022 with output of 16,500t and the Aquila Nickel project in Indonesia with a nickel production capacity of 16,600t is tipped to begin operations in 2023.
The agency expects nickel production to grow at a compound annual growth rate (CAGR) of 3%, to hit 2.73 million tonnes in 2025 and combined production from Indonesia, the Philippines, Canada and Russia to increase from the 2021 forecast of 1.607Mt in 2021 to 1.818Mt in 2025.
Increasing nickel consumption
Leading analysis and information services provider S&P Global Market Intelligence says that demand outside China will drive global growth in 2022, while later stainless steel capacity expansions in China and Indonesia will lead to yearly increases in nickel consumption over the next three years.
“Global consumption is forecast to rise at a compound annual growth rate of about 7% between 2020 and 2025,” S&P said.
“The battery sector’s nickel demand is also expected to accelerate substantially, with many predicting it to near 35% of total demand by the end of the decade.”