Column-Only Indonesia can help nickel recover from | Commodities

By Andy Residence

LONDON (Reuters) – ended 2024 trading at four-year lows, a spectacular reversal of fortune for a metallic that soared so high in 2022 it virtually broke the London Metallic Trade (LME).

There may be no thriller to this dramatic story of growth and bust.

Indonesia has flooded the world with more metallic than it may well soak up, crushing the price and leaving a path of casualties among the many relaxation of the world’s producers.

The market’s fortunes this yr rely upon whether or not Jakarta can tame the excesses of its nickel sector and align provide more carefully with demand.

There are constructive indicators. Indonesia’s mining ministry plans to cut the nickel ore mining quota to 200 million metric tons this yr from a beforehand deliberate 240 million.

The news has sparked a modest price revival, LME 3-month nickel rising by 3% for the reason that begin of January. Whether or not it is enough to generate a more sustained restoration stays to be seen.

OUT OF THE SHADOWS

Indonesia has emerged because the world’s dominant nickel producer over the past decade.

The nation’s mined manufacturing exploded from 358,000 tons in 2017 to 2.2 million tons in 2023, based on the World Bureau of Metals Statistics. Indonesian provide was equal to over half of world demand that yr.

The Indonesian provide tsunami initially washed by the Class II phase of the nickel market within the kind of chrome steel inputs corresponding to nickel pig iron.

That is modified over the past two years after Chinese language operators mastered the technology to transform Indonesia’s comparatively low-grade useful resource into high-purity Class I merchandise corresponding to sulphate and refined metallic.

The processing revolution has transferred the market surplus from the Class II shadows to the extremely seen world of exchange trading.

STOCKS SURGE

The LME has listed 5 Chinese language manufacturers and one Indonesian model of refined nickel since its 2022 meltdown.

The impression is evident to see in rising LME stock.

Low LME shares have been one of the explanations for the price going supernova in March 2022. They continued sliding by the primary half of 2023, falling beneath 40,000 tons for the primary time since 2007.

LME stock has since surged to 172,206 tons on the back of Chinese language and Indonesian deliveries.

There was no Chinese language nickel within the LME storage system till August 2023. As of the top of December 2024 there have been 70,000 tons, accounting for 47% of on-warrant shares. The primary Indonesian metallic turned up in July final yr and amounted to over 7,000 tons by the close of December.

LME registered shares are solely half of the larger shares image.

LME off-warrant shares have additionally grown, whereas Shanghai Futures Trade shares have risen to a five-year high of 35,327 tons.

Complete (EPA:) exchange stock was virtually 230,000 tons on the finish of November 2023, the very best stage since 2021.

That is good news for each exchanges. The bodily liquidity enhance has helped restore confidence in each markets, producing a restoration in trading volumes after exercise slumped within the wake of the 2022 nickel disaster.

It has been much less good news for anybody within the nickel manufacturing business exterior Indonesia and China. Rising shares have pushed the price ever decrease.

BATTERY DEMAND STUTTERS

It isn’t as if nickel demand has collapsed.

The chrome steel sector, which nonetheless accounts for the most important share of the metallic’s utilization, carried out strongly in 2024. International melt-shop manufacturing rose by 6.3% year-on-year within the first half of final yr, based on industry affiliation worldstainless.

However nickel’s utilization in electric vehicle (EV) batteries has been weaker than anticipated.

Though world EV gross sales grew by 25% in 2025, most of the growth got here from China, the place automotive corporations are more and more shifting to non-nickel battery chemistry corresponding to lithium-iron-phosphate.

Western car-makers are sticking with nickel of their batteries however EV gross sales rose by a comparatively modest 9% in North America and contracted by 3% in Europe final yr, based on consultancy Rho Movement.

Furthermore, each Western and Chinese language car patrons are selecting hybrids over pure battery fashions and hybrids need smaller batteries.

Researchers at Adamas Intelligence estimate that the worldwide sales-weighted average quantity of nickel deployed per passenger vehicle battery was 12.6 kg in November 2024, down 16% from November 2023.

Whereas European EV gross sales are anticipated to get well this yr as more durable emission guidelines kick in, North American gross sales face the problem of Donald Trump rolling back the Biden administration’s EV subsidy scheme.

SUPPLY DISCIPLINE

Indonesia has made no secret of its need to leverage its nickel provide dominance into pricing dominance.

It now has that energy.

The important thing query for the nickel market is how it’ll use that energy.

The cut to this yr’s ore quotas means that Jakarta is aware of the price has fallen too far even for some of its own producers.

The trick can be tailoring manufacturing charges to a fast-evolving EV battery demand dynamic. With out provide self-discipline from the world’s dominant producer, a sustained nickel price restoration will stay elusive.

The opinions expressed listed here are these of the writer, a columnist for Reuters.