Nickel and dimes: where to for the struggling metal?

Nickel, one of the top 5 most common and most versatile elements on earth — found in stainless steel, batteries, and non-ferrous alloys — has been the worst-performing metal on the London Metal Exchange (LME) so far in 2023, according to financial services corporation ING Group. 

By 4 December, spot prices were down 45% from its early January 2023 peak of US$30,958 per tonne. As of today (21 December 2023), nickel is trading at US$16,517 per tonne. This price is not far from a more-than-2.5-year low recorded on 27 November, when nickel was trading just shy of US$15,800 per tonne.

This stark price decline comes amid robust supply from major nickel-producing countries Indonesia and China. 

Over its outlook period, the Australian Department of Industry, Science, Energy and Resources (DISER) reports weaker prices are expected to push Australian nickel export earnings lower. 

In 2022-2023, nickel’s export earnings were at $5 billion, while in 2023-2024, they are forecast to be sitting at $3.9 billion. 

Due to the falling nickel price, companies such as Panoramic Resources (ASX:PAN) have been impacted and, as such, have entered voluntary administration. 

The company announced on 14 December that it had initiated a strategic review to evaluate options for its Savannah Nickel Project, inclusive of the operating Savannah nickel mine in Western Australia. 

As a result, Panoramic has been unable to satisfactorily progress any sales, recapitalisation, or partnering options to a point where they would provide sufficient financial certainty to the company and its stakeholders. 

The administrators appointed plan to pursue an expedited dual-track strategy to either sell or recapitalise the Panoramic business. 

Used in a wide range of end-use sectors, nickel can be traced back as early as 3,500 BCE, and the silvery-white metal emerged as currency in the 1800s, specifically in the US.

According to DISER in its December 2023 Resources and Energy Quarterly, Chinese demand continues to be the main driver for global nickel consumption. 

Chinese demand for nickel mostly commonly revolves around stainless steel and electric vehicle (EV) battery production. 

The Nickel Institute says more than 30% of the nickel supply is used in the engineering sector, 23% of the supply is used for metal goods, 16% in the transport sector, and 14% is used in building and construction. 

In April 2023, the International Nickel Study Group (INSG) forecasted the world’s primary nickel production to reach 3.374 million tonnes, with the usage forecasted to be 3.134 million tonnes. 

The countries that will be mainly contributing to this surplus of nickel production are Indonesia, Philippines, Russia, New Caledonia, and Australia — with the ‘largest’ consumer of nickel being China. 

Pacific Nickel Mines (ASX:PNM) will be one of the newer ASX-listed nickel producers — as previously reported, the company’s Kolosori Nickel Project in the Solomon Islands is now fully operational. 

The company reports that 4 barges contracted with Marinepia Shipping Company have recently arrived on site, and these 3,000-tonne barges began ore loading in preparation for barging to a geared transport ship in mid-December 2023. 

Looking forward to 2024, ING Group sees the global consumption of nickel increasing due to the recovery of the stainless steel sector and increased usage of nickel in electric vehicle batteries. 

Still, it is expected that nickel will mark a third consecutive year of excess supply, forecasted to be the largest surplus yet.  According to ING, global output is expected to increase to 3.71 million tonnes (Mt) in 2024, compared to 3.42Mt in 2023, as Indonesia’s nickel pig iron (NPI) production continues to rise. 

ING also sees prices averaging at US$16,600 per tonne in Q1 2024 and gradually moving up to US$17,000. 

Investor interest in nickel as a key green metal will support these higher prices forecasted by ING, as the financial services corporation believes the demand for EV batteries will be a driving factor in nickel’s longer-term story.

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Images: Pacific Nickel Mines and Panoramic Resources
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Written By Aaliyah Rogan
Relocated from the East Coast in New Zealand to Queensland Australia, Aaliyah is a fervent journalist who has a passion for storytelling. When Aaliyah isn’t writing stories, she is either spending time with friends and family or down at the beach.