Global nickel production to decline significantly in 2020 – Fitch Solutions

6th March 2020 By: Simone Liedtke - Writer

Research agency Fitch Solutions expects global nickel production to decrease significantly over the course of this year, as major producer Indonesia’s nickel ore export ban comes into effect.

The ban in Indonesia was announced in September 2019, bringing it forward to go into effect from January this year instead of January 2022.

As a result, Fitch expects global nickel ore production to decrease by 60% year-on-year to 269-million tonnes this year.

This compares with the agency’s previous forecast of 15% growth in global nickel ore output this year.

Production growth in the Philippines, where some currently suspended mines will become operational again as the country aims to plug the supply gap caused by the Indonesian export ban, will offset the lower Indonesian output to some extent.

In the longer term, the ban could increase investment into Indonesia’s growing smelting sector, which refines the mined nickel ore, the agency noted.

The Philippines is, as a result, expected to dethrone Indonesia as the top nickel producer globally, with mining production in the Philippines expected to witness a significant surge in 2020 as currently suspended mining operations in the country are set to obtain licences to resume operations.

According to Fitch’s estimates, from 2016 until 2018, production in the Philippines declined by an average of 12% as a result of the banning of openpit mining owing to environmental concerns.

Fitch anticipates production in the Philippines to continue growing over the coming years, despite concerns that high levels of policy uncertainty could constrain project development. This, the agency said, poses downside risks to its forecasts.

However, it still forecast nickel production in the country to average 5.1% year-on-year growth over the 2020 and 2029 period, with domestic miners expected to account for the vast majority of nickel production in the country.

Meanwhile, other major producers – Russia, Australia and Canada – are expected to maintain stable production growth year-on-year, despite global nickel ore production being expected to fall by 15.4% year-on-year as a result of the Indonesian ban.

Australian nickel production growth will also remain positive over the coming years owing to a healthy project pipeline. Fitch said there were 21 new nickel projects in the country’s pipeline, which it said would support average production growth of 2.1% year-on-year over the 2020 to 2029 period.

Australia also held important reserves of nickel sulphide, which would be in high demand over the coming years owing to the use of nickel in producing electric vehicle batteries, which are anticipated to see significant production growth in the coming years.

In effect, this meant that the Australian nickel sector would likely attract further investor interest in the medium to longterm, Fitch noted.

Meanwhile, Russia was expected to continue losing out in terms of its share of global nickel production.

The country is expected to contribute only 8.9% of global production by 2029, down from the 10.4% forecast for this year, owing to a weak project pipeline and a restrictive investment environment.

Fitch forecast the country’s production growth rate to average 1.8% year-on-year over 2020 to 2029 – the slowest of all major global nickel producers.

In the longer term, however, Fitch forecast global nickel production to grow by an average of 1.7% year-on-year between 2020 and 2029, marking a slowdown from the 6.7% year-on-year average growth achieved over the 2010 to 2019 period.

By 2029, Fitch expects global yearly nickel production to reach 2.8-million tonnes, up from the 2.1-million tonnes to be produced this year.