Nickel prices are set to unwind in coming months as fundamentals loosen on the back of increased supply from Indonesia and subdued demand from China.

This is the view of BMI Research – a unit of the Fitch Group.

We have kept our nickel price forecast at US$10 000/ton for 2018 and expect prices to head lower over our forecast period from 2017-2021 as the global nickel market surplus widens.

Price forecast

Refined nickel prices will continue to lose steam in the coming months as overly-optimistic demand-side expectations from electric vehicle (EV) production begin to fade and fundamentals loosen.

A significant rally in prices took nickel from below 9 000/ton in June 2017 to above 13 000/ton in early November 2017, buoyed by a positive demand outlook for use in batteries for the growing electric vehicle market.

However in line with our view, prices have come back down to 11  295/ton and will continue to trend downwards in the coming months dragged by the realization among investors that any significant impact of EV’s on demand is still years away.

Further downside pressure on prices will emerge in the short term as the global nickel market shifts into a surplus.

On the one hand, we expect stainless steel demand – which accounts for approximately 70% of all nickel consumption – to wane as the Chinese government shifts policy away from heavy industry.

On the supply side, a loosening of fundamentals will be supported by a rise in Indonesian ore exports flowing into the market for refining following the end of the country’s ore export ban in January 2017.

According to Bloomberg high frequency data, Indonesian nickel ore production growth averaged 62% y-o-y over the first nine months of 2017.

Furthermore we are more optimistic on nickel production in the Philippines in the coming months , as an end to the current ban on open-pit mining remains is likely under the new Secretary of Environment and Natural Resources, Roy Cimatu.

Finally, stocks at LME warehouses remain elevated at 379 kt, while LME 3-month nickel futures remain firmly in contango, indicating ample near-term supply.


We expect global refined nickel production will increase from 1.89 Mt in 20 17 to 1.92 Mt in 2018.

This uptick in production will be driven by a recovery in Chinese, Russian and Australian production following a contraction for all these major producers over 2017 and will be aided by an improved price environment since H217.

Additionally, Indonesia’s mineral ore export ban moderation in January 20 17 will lead to a significant increase in production growth from the country for the firs t time since 2014.

Indonesia will have the fastest refined nickel output growth rates from 2017-2021, increasing its total production from 43 kt in 2017 to 50 kt in 2021, amounting to average annual growth of 9.4%.

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