Output from the world's top nickel miners increased year over year for the first quarter, and global production growth is expected to accelerate in 2022 due to capacity expansions and recovery from disruptions last year.

Total primary nickel output from PJSC Mining and Metallurgical Co. Norilsk Nickel, Glencore PLC, Vale SA, BHP Group Ltd. and PT Vale Indonesia Tbk rose 3.6% to 142,874 tonnes in the first three months of 2022 but fell 11.2% from the fourth quarter of 2021, according to data from S&P Global Market Intelligence.

Primary nickel refers to the nickel in smelter and refinery products, including refined nickel used to make electric vehicle batteries, as well as nickel pig iron and ferronickel used in steelmaking.

The year-on-year production rise came amid a spike in nickel prices following Russia's Feb. 24 invasion of Ukraine, driven by fears of supply disruptions from top producer Russia. On March 8, the London Metal Exchange, or LME, suspended nickel trading for six days after a short squeeze brought the three-month nickel price to over $100,000 per tonne. Nickel prices have since cooled off as Russian nickel was exempted from sanctions.

Norilsk Nickel and Glencore booked higher production year over year during the quarter, offsetting output declines posted by Vale, BHP and PT Vale Indonesia. Primary nickel production from Norilsk Nickel jumped 12.8% on the back of the restart of its Oktyabrsky and Taimyrsky mines as well as the ramp-up of the Norilsk concentrator, all located in Russia.

The two mines were shut down in February 2021 due to flooding. Normal operations returned in Oktyabrsky in May 2021, followed by Taimyrsky in June 2021. The Norilsk concentrator had been idled in February 2021 after a fatal accident during renovation work.

Glencore's primary nickel production climbed 21.8% in the first quarter, reflecting improved production from its 49%-owned Koniambo mine in New Caledonia. Technical problems and protests disrupted the operation in 2021.

Further nickel output growth expected

Global primary nickel production is expected to grow 15.7% year over year in 2022 compared to 4.7% in 2021, Jason Sappor, senior analyst at S&P Global Commodity Insights' Metals and Mining Research team, said in an email.

Sappor said the increase will be primarily driven by producers such as Tsingshan Holding Group Co. Ltd. further expanding capacity in Indonesia.

Norilsk Nickel, Glencore and Vale are also set to increase their production in 2022 compared with 2021, when their operations were hit with disruptions, Sappor said.

Nickel market in 'state of flux'

In 2022, primary nickel supply growth is expected to outpace demand, leading to a global primary nickel market surplus of 71,000 tonnes compared to a deficit of 160,000 tonnes in 2021, Sappor said.

Despite this, the LME three-month nickel price is forecast to average $27,241 per tonne in 2022, up 47.5% year over year, largely due to the unprecedented price hike after March’s short squeeze.

But even before the LME debacle, the global nickel market had been in a "state of flux," according to Stuart Burns, founder and editor-at-large of Metal Miner, a metal pricing and analysis platform.

"There appears to be a rapidly shifting dynamic between nickel shortage caused by the pandemic bounceback last year against rising output, particularly from Indonesia," Burns told Commodity Insights in an email.

Mined nickel production up

Output among the top five mined nickel producers grew 11.3% year over year to 21,944 tonnes in the first quarter but declined 8.5% from the final quarter of 2021. Mined nickel refers to the nickel in ores coming out of the ground.

Sumitomo Corp.'s mined nickel production shot up 1,600% year over year to 5,100 tonnes, which made up for drops in production reported by IGO Ltd., Lundin Mining Corp., Western Areas Ltd. and Boliden AB (publ). Sumitomo resumed operations at its 54.2%-owned Ambatovy mine in Madagascar in March 2021 after a stoppage linked to the pandemic.

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