TRADE REVIEW: Asia nickel market sees pressure in Q1 from slow demand, supply surplus

This report is part of the S&P Global Commodity Insights' Metals Trade Review series, where we dig through datasets and digest some of the key trends in iron ore, metallurgical coal, copper, alumina, cobalt, lithium, nickel and steel and scrap. We also explore what the next few months could bring, from supply and demand shifts, to new arbitrages, and to quality spread fluctuations.

A supply surplus driven by increased production in Indonesia and slowing demand from stainless steel and battery materials sectors would continue to exert pressure on nickel prices, making it unlikely for high-cost mines to come back online in the first quarter.

"We expect the market to remain oversupplied in 2025, with a projected surplus of 156,000 mt, as Indonesia and China's primary output expands further," said Jason Sappor, metals and mining senior analyst at S&P Global Commodity Insights.

China stimulus fails to lift market

China unveiled Nov. 8 a Yuan 10 trillion fiscal plan spread over the next three years to reduce local government debt risks and clear excess property inventories. The move followed a large stimulus package announced Sept. 24(opens in a new tab) to boost the country's economic activity.

The measures, however, lacked clarity and failed to lift investor confidence in the Chinese market. The LME 3M nickel price closed at $15,328/mt Dec. 31, down 15.6% from its quarterly peak at $18,153/mt Oct. 2.

More proactive policies are required to increase consumer household income and spending, market participants said.

Nickel ore prices slide

The Philippines, the world's second-largest mined nickel producer behind Indonesia, accounted for about 387,000 mt Ni, or 10% of the total estimated mined nickel production in 2024, according to Commodity Insights data. Market talks indicated that the country suspended mine operations in mid-December amid the holiday season coupled with rains, which led to decreased mined volumes in the fourth quarter.

News about Indonesia's plans to limit output for supporting global nickel prices surfaced Dec. 12. However, both low- and high-grade nickel ore prices continued to observe an overall downtrend in Q4, pressured by contracting nickel pig iron prices.

Low-grade nickel ore prices declined 14% within the quarter to the lowest in Q4 at $34.50/wmt Dec. 24 while high-grade nickel ore prices fell 6% to the lowest at $58/wmt Dec. 24.

Platts, part of Commodity Insights, assessed low-grade nickel ore with 1.3% nickel content at $36/wmt CIF China and high-grade nickel ore with 1.6% nickel content at $59/wmt CIF China Jan. 14, down 9% and 4.9%, respectively, from the start of Q4.

Downtrend in Q4 NPI prices

China's stainless steel sector, a key nickel-consuming industry, also saw a slowdown in Q4 as the property market remained sluggish. This limited spot NPI demand as steel mills' purchases remained lackluster amid ample inventories.

NPI with 10% nickel content fell 10.5% to $114.50/mtu Dec. 31 from its peak at $128/mtu FOB Indonesia Oct. 18, according to Commodity Insights data.

Q1 NPI prices are expected to be rangebound on weak Chinese stainless steel demand approaching the Lunar New Year holidays. January stainless steel production could see a 10%-20% month-on-month reduction, market participants said.

Platts assessed daily spot NPI with 10% nickel content at $112/mtu FOB Indonesia Jan. 14, down 7.43% since the start of Q4.

Indonesia clamps down on mining quotas

Media reports in the week to Jan. 9 showed that Indonesia is not only looking into 2025 mining quotas to check on miners' adherence to regulations but is also scrutinizing 2025 mining approvals to maintain balanced fundamentals in a bid to stabilize nickel prices.

Mining quotas slowed down in 2024, leading to nickel ore tightness after the government introduced a new approval system to guard against illegal mining late 2023. Indonesian imports of nickel ore for January to October saw a 2387% jump year on year to over 9 million mt, according to data from Badan Pusat Statistik Indonesia.

Eyes on energy transition

Although nickel prices have been subdued, with mine closures expected to be prolonged, some expected that the bearishness would be short-lived. The Philippines is working on new laws to attract investment(opens in a new tab), betting on nickel's prospects due to energy transition-related demand in 2025, despite declines in 2024.

Electric vehicle sales are growing globally, but battery chemistries have shifted away from nickel-manganese-cobalt batteries toward lithium-iron-phosphate batteries, which are nickel-free,

The Chinese NMC production share has been below 30% since April, falling to 24.2 GWh and making up 21% of the 117.8 GWh battery production for November, according to data from the China Automotive Battery Innovation Alliance.

With the shift toward nickel-free LFP battery chemistry, nickel sulfate demand has declined significantly. Q4 spot buying remained slow with prices supported by need-only activities.

Chinese nickel sulfate prices rose to a high of Yuan 27,250/mt ($3,823/mt) Oct. 18 before falling to its lowest in Q4 at Yuan 25,000/mt ($3,477/mt) Dec. 10. Prices are likely to remain subdued with slight support from production costs in Q1.

Market participants were bearish on nickel sulfate for 2025 with several key feedstock mixed hydroxide precipitate projects(opens in a new tab) in the pipeline.

Platts assessed spot battery-grade nickel sulfate with a minimum 22% nickel content and maximum 100 ppb magnetic material at Yuan 25,800/mt ($3,589/mt) DDP China Jan. 14, down 4.8% since the start of Q4, Commodity Insights data showed.

Trump's reelection

President-elect Donald Trump's impending tariffs(opens in a new tab) announced Nov. 25 on goods from Canada, accounting for nearly half of the US nickel imports at 5,844 mt as of Oct. 24, would increase production costs(opens in a new tab) in the US, slow the country's energy transition process and potentially increase reliance on Chinese metals, sources said

Market participants are closely monitoring any changes to existing policies, such as the US Inflation Reduction Act, and the rollout of new initiatives from the incoming administration in Q1.