Research agency Fitch Solutions and Country Risk has revised upward its average nickel price forecast for the year from $15 750/t to $16 500/t.
The agency says nickel is enjoying strong demand from stainless steel producers, while a sustained market deficit will support higher prices up to 2025.
The nickel price averaged $13 860/t in in 2020.
Chinese stainless steel demand for nickel remains high, with domestic nickel-based stainless steel production experiencing 23.5% year-on-year growth during the first quarter of the year, but Fitch Solutions expects that a slowdown is imminent.
Fitch Solutions explains that nickel has averaged about $17 300/t in the year-to-date, prompting its upward price revision, despite some price dips and notwithstanding the Chinese regulators warning domestic commodities firms to keep the market fair after base metals experienced a strong rally.
“We expect London Metal Exchange nickel prices will trade lower than present spot levels in the coming months, as demand from steel production stabilises and nickel metal production ramps up.
“In recent months, prices have broadly recovered from a steep price correction in March which occurred after an announcement by Chinese stainless steel producer Tsingshan that it plans to bridge the nickel-pig-iron-to-battery-grade-nickel divide by the end of 2021 and substantially increase nickel production for both 2022 and 2023,” Fitch Solutions elaborates.
Fitch Solutions explains that increasing supply in the global nickel market as the year progresses will ensure lower pricing by the end of the year.
Indonesian nickel output is expected to experience 33% year-on-year growth this year, while French base metals firm Eramet plans on ramping up metallurgical production of contained nickel.
Overall, Fitch says, nickel prices will remain on a gradual uptrend over the next decade as the global market remains in deficit and China’s construction sector continues to grow.
Demand for nickel will also be supported by increasing electric vehicle (EV) production across the world.
For example, Fitch Solutions’ automotive team forecasts Chinese EV sales to grow by an average 10% a year through to 2029.
However, a shortage of Class 1, battery-grade nickel may encourage automakers to explore lithium-iron-phosphate (LFP) batteries for mass market vehicles, presenting downside risk to nickel demand for lithium-ion batteries.
Case in point, Tesla CEO Elon Musk in February said nickel is the firm’s biggest inhibitor to successfully scaling lithium-ion cell production and this has prompted Tesla to shift its standard range vehicles to contain LFP cathodes.
Tesla does intend, however, to use the high-nickel, cobalt-free cathode for its cybertruck and semi truck vehicles and continues sourcing raw material from the Goro nickel mine, in New Caledonia.