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A Nickel Glut Is Looming

Supply of nickel deliverable to the London Metal Exchange could jump next year by 35% compared to 2022 levels as new plants for nickel processing in China and Indonesia could cause a glut and crash prices, analysts at Macquarie Group say.

The new plants in Asia would process growing volumes of intermediate nickel products into LME-deliverable nickel metal, the strategists wrote in a note quoted by Bloomberg. The pure nickel metal accounts for only 20% of global production of nickel, the other forms of nickel are intermediate products used in the steel and battery manufacturing industries.

The market for nickel is at a “turning point,” Macquarie’s analysts said.

The nickel market has been chaotic over the past year and a half after the huge short squeeze from March 2022, when short sellers raced to cover bearish bets after Russia’s invasion of Ukraine sparked a rally in metals and energy and agricultural commodities.

In early March 2022, nickel prices soared to an astonishing $100,000 per ton—doubling the previous all-time high over the course of one morning—and plunged the London Metal Exchange into an existential crisis.

This year, the physical market has been oversupplied, and prices have slumped to around $20,000 per ton as more supply from Indonesia has hit the market.

Indonesia, the world's biggest nickel miner, has been looking to develop nickel processing industries and ultimately produce batteries for EV manufacturers. At the end of last year, Indonesia said it was considering the idea of forming a cartel to manage the supply of nickel and some other key battery metals, similar to what OPEC does for oil.

“I do see the merit of creating Opec to manage the governance of oil trade to ensure predictability for potential investors and consumers,” Indonesia's Investment Minister Bahlil Lahadalia told the Financial Times in an interview last autumn.  

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By Charles Kennedy for Oilprice.com

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