Roskill reports that “for the nickel market, 2014 may prove to be a turning point when vitality is restored to an industry that saw prices dip below $14,000/t in July 2013. At this level, not seen since 2009, an estimated 30% of operations are believed to be unprofitable, as demonstrated by numerous suspensions and closures in Australia and at other high-cost operations. As PMI indices, macroeconomic indicators and growth forecasts turned more optimistic, downward price trends reversed in the second half of 2013 – a reversal that is expected to be sustained.
“In China, rotary kiln electric furnace (RKEF) technology has lowered NPI production costs by around 25%, but also serves to increase demand for high-grade nickel ore, sourced mostly from Indonesia. In anticipation of an expected ban on raw ore exports, Chinese-owned NPI smelter projects are underway in Indonesia, but are unlikely to be completed before 2015. Lack of access to reliable power supplies may delay the completion of Indonesian RKEF plants and, in the short term, may limit NPI production in Indonesia to plants based on outdated blast furnace technology.
“Stockpiles of lateritic ore in Chinese ports are likely to exceed 20 Mt by the beginning of 2014. Combined with stocks held in producer, consumer and LME warehouses this material provides partial insulation from an Indonesian supply shock. However, whether implemented in full or in part, a ban on Indonesian ore exports will put upwards pressure on prices, as was already evident in the second half of 2013. At the same time, a gradual displacement of NPI production from China to Indonesia opens up the possibility of Indonesian exports of NPI to non-Chinese stainless mills.
“Outside China, operations such as Ambatovy, Goro, Koniambo and others are ramping up to full production, potentially adding around 100,000 t of output in 2014, and an additional 70-80,000 t in 2015. The nickel market is expected to remain in surplus through 2015, but as primary nickel use is expected to grow at 3.9% per year to 2018, supply and demand are expected to reach approximate balance towards 2016. Investment in expansion of capacity will be required to supply the market beyond this point; this is forecast to drive a recovery in prices and premiums to levels explained in detail in Roskill’s latest Nickel Market Outlook report.