Nickel Market Faces Surplus Amid Weak Demand Forecasts

The nickel market is projected to swing into a 198,000 metric ton surplus by 2025, as weakening demand and increased production take their toll. Investors should be cautious amid rising volatility and lower prices, particularly due to US tariffs on Chinese goods.

Date: 02-05-2025

AI Rating: 4

Market Surplus and Price Struggles
The recent report indicates a significant surplus in the nickel market, projected at 198,000 metric tons in 2025. This forecast comes in the wake of rising production, expected to reach 3.735 million MT in 2025, and deteriorating demand tendencies, especially in major consumer markets like China. The anticipated increase in global nickel production coupled with stagnant demand is likely to exert downward pressure on prices. Nickel has already lost more than 7% of its value in 2024 and is grappling with volatility, highlighting the precarious nature of the current market situation.

Regulatory and Geopolitical Pressures
Regulatory constraints, particularly in Indonesia, which produces over half of the world's nickel, are exacerbating market conditions. Newly approved royalty hikes have been criticized by industry stakeholders as unrealistic, further complicating supply dynamics. Moreover, proposed bans on raw nickel exports from the Philippines could create additional uncertainties in global supply chains, potentially leading to price fluctuations. The geopolitical backdrop, such as recent tariff hikes on Chinese nickel products, adds another layer of complexity to the market, currently resulting in elevated stockpiles and significant imports challenges.

China's Demand Dynamics
China, the largest consumer of nickel, is expected to see a rise in output yet suffers from reduced demand, particularly for stainless steel and EV batteries. The slowdown in key sectors, alongside a shift towards lithium iron phosphate batteries that diminish nickel usage, points towards a potential stagnation in demand growth. This situation could further deepen the projected surplus and compress prices. Analysts expect another year of surplus in the stainless steel segment, indicating possible price pressures that could persist throughout the year.

The combination of oversupply, regulatory uncertainties, and demand dynamism raises the risk profile for stakeholders in the nickel market. Investors should closely monitor these trends and adjust their strategies accordingly.

Stocks: NUE TSLA FCX