Nickel market to swing to mild surplus persisting beyond 2022: Nornickel

Global primary nickel production may grow 19% in 2022 to 3.21 million mt and the nickel deficit of 2021 should swing to a mild surplus of about 40,000 mt in 2022, albeit comprising mostly low-grade metal, according to Russia's Nornickel.

Nornickel made allowance though that the abnormal price volatility, the energy supply crunch, new COVID-19 lockdowns, and potential supply disruptions amid extremely tight nickel exchange inventories -- equating to less than 10 days of global consumption -- may impact its forecast significantly.

For now, the company sees refined nickel production to increase this year on the overwhelming growth of Indonesian nickel pig iron, or NPI, capacities. It also sees the continuous growth of nickel-containing compounds for the EV batteries sector, spurred by the launch or ramp-up of high-pressure acid leach, or HPAL, facilities in Indonesia, Australia and Caledonia, and NPI-to-matte conversion lines to raise output in the year.

The year promises spectacular growth in Indonesia's production of NPI -- a low-grade ferronickel and a cheaper alternative to pure nickel used for making stainless steel. The country could produce close to 1.1 million mt of nickel in NPI, up 33% year on year, Nornickel said.

The global production of nickel compounds for the EV market is set to double year on year to 407,000 mt.

Nornickel though downgraded its projected ferronickel supply, which is now expected to increase 5% on the year and not 11% as estimated earlier, to 394,000 mt, as a result of operational difficulties across some projects, high energy prices and geopolitical tensions from the Russia-Ukraine war.

Primary nickel demand is expected to grow 11% year on year to 3.17 million mt as stainless steel output is set to climb 9%. The ever-growing nickel intake in batteries may jump 27% on the year.

Strong oil and gas and aerospace sectors will ensure moderate increases in nickel's non-stainless steel applications.

NPI-to-matte conversion picking up

Nornickel expects the overall NPI-to-matte conversion to reach 92,000 mt nickel in 2022.

In the first quarter, Chinese metallurgical holding Tsingshan switched eight rotary kiln-electric furnaces that produce ferronickel from laterite ore in Morowali, Indonesia, to matte production. As a result, China imported 9,000 mt of nickel in matte in the first three months of the year.

China-headquartered CNGR and Huayou should launch matte production later this year.

NPI has swayed to record discounts recently, which makes conversion economically viable, noted Nornickel.

The biggest concern limiting the NPI-to-matte conversion and HPAL are their significant carbon footprint of 45 kgCO2/kg of nickel equivalent, as coal-fired power plants are their only source of electricity.

The upgrade of nickel pig iron, which generally contains less than 5% nickel, to nickel matte having 30%-60% nickel content entails other environmental, social and governance issues, such as deforestation, water depletion and contamination, and poses a question of how sustainable these businesses and their products are, said Nornickel.

Surplus to widen beyond 2022

From the current perspective, Nornickel expects primary nickel production to increase further by 16% to more than 3.7 million mt in 2023.

In 2023, Nornickel expects the global market surplus to widen to 100,000 mt and to persist onward, although it is still to be concentrated on low-grade nickel due to the oversupply of Indonesian NPI.

The supply of Class 1 nickel -- products with a minimum 99.8% nickel, including electrolytic nickel, briquettes and carbonyl nickel -- will remain tight given the challenges in bringing online new mine supply outside Indonesia.