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Nickel Price Decline: A Temporary Setback or Long-Term Trend?

Jun 21, 2024

 

Nickel Price Trends: Temporary Setback or Long-Term Pattern?

According to a report from CARBON CREDITS on June 20, 2024, the recent dynamics in the global nickel market have seen a significant decline in price, reflecting the complex interplay between economic factors and strategic decisions.

Nickel Price Movement and Market Impact

The London Metal Exchange (LME) three-month closing nickel price has experienced a notable drop from $19,830 per metric ton at the end of May to $17,891 on June 10. This marks a key shift as it is the first time since mid-April that nickel prices have fallen below the $18,000 per ton threshold.

The nickel price retreat is largely attributed to decisive actions taken by investment funds. Against the backdrop of a strong dollar and poor manufacturing data, these investors have chosen to close their positions. These factors have collectively exerted downward pressure on nickel prices, reversing the gains when nickel prices soared to a nine-month high of $21,615 per ton in May.

Key Market Events

  • European Central Bank interest rate cut;
  • Continued production stagnation in New Caledonia;
  • Indonesian ferronickel and nickel pig iron plant licenses to be terminated.

The sharp price drop reflects a contraction in net long positions of investment funds on the LME, indicating a significant liquidation of long positions.

Focus on the Nickel Supply Chain

Beyond these market dynamics, the strategic moves of major global players have also influenced the trajectory of nickel prices.

Notably, the United States has expressed strategic interest in establishing a partnership with the Philippines, the world's second-largest nickel producer, to secure the nickel supply necessary for its burgeoning battery industry. This strategic move comes as the U.S. grapples with the reality of limited domestic nickel reserves compared to major producers like Indonesia.

With the Philippines exporting 39.9 million metric tons of nickel ore to China, its importance in the global supply chain is highlighted. The U.S. anticipates a significant increase in nickel demand for electric vehicle batteries, with an expected growth of 211,000 metric tons between 2023 and 2028. This surge in demand underscores the need for a reliable nickel supply chain.

Short-Term Lull, Long-Term Optimism

Looking ahead, analysts from S&P Global Commodity Insights predict that the global primary nickel market will continue to face challenges of oversupply for the remainder of this year. Despite bullish sentiments, potential supply-demand imbalances are expected to suppress nickel prices.

S&P analysts forecast that the weak fundamentals of the global primary nickel market will continue to exert downward pressure on prices. Specifically, they predict that total primary nickel stocks, calculated on a weekly consumption basis, will reach a four-year high in 2024. This anticipated increase in inventory may limit any significant price recovery for the rest of this year.

Long-Term Considerations

While short-term price fluctuations are driven by speculative activities and current market conditions, the long-term outlook for nickel remains optimistic, primarily due to its crucial role in global economic energy transition.

The growing demand from the electric vehicle (EV) industry and renewable energy technologies will drive long-term demand growth for nickel. As a key ingredient in lithium-ion batteries, nickel stands to benefit significantly from the global shift towards electrification and renewable energy.

Although prices may remain subdued in the short term due to oversupply, the medium to long-term outlook suggests that prices may rebound as demand catches up with supply. Market participants will closely monitor advancements in battery chemistry technology, policy support for clean energy, and macroeconomic conditions.

Recent declines in nickel prices are due to market readjustments and strategic decisions by major global players. Stakeholders should be prepared for ongoing market volatility and limited immediate price recovery.

Americ Energy (CHINA) Co., Ltd. stands as a prominent manufacturer and distributor of a comprehensive range of stainless steel products, designed to cater to the diverse needs of various industries. Their offerings encompass stainless steel tubes, plates, strips, and square tubes, all manufactured to uphold the highest quality benchmarks.

Contact Information:

Website: www.metal-ae.com

Email: ae@americenergy.com

Phone: 13521210668

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