By Andy Home
LONDON (Reuters) -Nickel ended 2024 trading at four-year lows, a spectacular reversal of fortune for a metal that soared so high in 2022 it almost broke the London Metal Exchange (LME).
There is no mystery to this dramatic tale of boom and bust.
Indonesia has flooded the world with more metal than it can absorb, crushing the price and leaving a trail of casualties among the rest of the world’s producers.
The market’s fortunes this year depend on whether Jakarta can tame the excesses of its nickel sector and align supply more closely with demand.
There are positive signs. Indonesia’s mining ministry plans to cut the nickel ore mining quota to 200 million metric tons this year from a previously planned 240 million.
The news has sparked a modest price revival, LME 3-month nickel rising by 3% since the start of January. Whether it’s enough to generate a more sustained recovery remains to be seen.
OUT OF THE SHADOWS
Indonesia has emerged as the world’s dominant nickel producer over the last decade.
The country’s mined production exploded from 358,000 tons in 2017 to 2.2 million tons in 2023, according to the World Bureau of Metals Statistics. Indonesian supply was equivalent to over half of global demand that year.
The Indonesian supply tsunami initially washed through the Class II segment of the nickel market in the form of stainless steel inputs such as nickel pig iron.
That’s changed over the last two years after Chinese operators mastered the technology to convert Indonesia’s relatively low-grade resource into high-purity Class I products such as sulphate and refined metal.
The processing revolution has transferred the market surplus from the Class II shadows to the highly visible world of exchange trading.
STOCKS SURGE
The LME has listed five Chinese brands and one Indonesian brand of refined nickel since its 2022 meltdown.
The impact is clear to see in rising LME inventory.
Low LME stocks were one of the reasons for the price going supernova in March 2022. They continued sliding through the first half of 2023, falling below 40,000 tons for the first time since 2007.
LME inventory has since surged to 172,206 tons on the back of Chinese and Indonesian deliveries.
There was no Chinese nickel in the LME storage system until August 2023. As of the end of December 2024 there were 70,000 tons, accounting for 47% of on-warrant stocks. The first Indonesian metal turned up in July last year and amounted to over 7,000 tons by the close of December.
LME registered stocks are only part of the bigger stocks picture.
LME off-warrant stocks have also grown, while Shanghai Futures Exchange stocks have risen to a five-year high of 35,327 tons.
Total (EPA:) exchange inventory was almost 230,000 tons at the end of November 2023, the highest level since 2021.
This is good news for both exchanges. The physical liquidity boost has helped restore confidence in both markets, generating a recovery in trading volumes after activity slumped in the wake of the 2022 nickel crisis.
It’s been less good news for anyone in the nickel production business outside Indonesia and China. Rising stocks have driven the price ever lower.
BATTERY DEMAND STUTTERS
It’s not as if nickel demand has collapsed.
The stainless steel sector, which still accounts for the largest share of the metal’s usage, performed strongly in 2024. Global melt-shop production rose by 6.3% year-on-year in the first half of last year, according to industry association worldstainless.
But nickel’s usage in electric vehicle (EV) batteries has been weaker than expected.
Although global EV sales grew by 25% in 2025, most of the growth came from China, where automotive companies are increasingly shifting to non-nickel battery chemistry such as lithium-iron-phosphate.
Western car-makers are sticking with nickel in their batteries but EV sales rose by a relatively modest 9% in North America and contracted by 3% in Europe last year, according to consultancy Rho Motion.
Moreover, both Western and Chinese car buyers are choosing hybrids over pure battery models and hybrids need smaller batteries.
Researchers at Adamas Intelligence estimate that the global sales-weighted average amount of nickel deployed per passenger vehicle battery was 12.6 kg in November 2024, down 16% from November 2023.
While European EV sales are expected to recover this year as tougher emission rules kick in, North American sales face the challenge of Donald Trump rolling back the Biden administration’s EV subsidy scheme.
SUPPLY DISCIPLINE
Indonesia has made no secret of its desire to leverage its nickel supply dominance into pricing dominance.
It now has that power.
The key question for the nickel market is how it will use that power.
The cut to this year’s ore quotas suggests that Jakarta knows the price has fallen too far even for some of its own producers.
The trick will be tailoring production rates to a fast-evolving EV battery demand dynamic. Without supply discipline from the world’s dominant producer, a sustained nickel price recovery will remain elusive.
The opinions expressed here are those of the author, a columnist for Reuters.
