The short-term outlook for nickel remains bearish amid a deteriorating macroeconomic picture and sustained market surplus, Kallanish learns from a new ING report.

The Dutch financial services corporation expects nickel prices to remain under pressure in the short term as a surplus in the market builds up. However, it says the tightness in the Class 1 market is likely to offer some support.

“We see prices hovering between $20,000/tonne and $20,500/t over the first two quarters of 2023, before gradually increasing to $21,000/t in 3Q and $22,000/t in 4Q as the global growth outlook starts to improve,” it says.

According to ING, continued weakness in demand from the stainless steel sector is leading the global nickel market towards surplus this year. Yet, the surplus is mostly in the Class 2 - ferronickel and nickel pig iron (NPI) market.

Citing the International Nickel Study Group (INSG), ING analysts anticipate a nickel supply excess of 144,000 t this year and another 171,000 t in 2023.

According to ING, stainless steel is still key for nickel demand, accounting for 70% of total nickel consumption. Although demand from the battery sector is growing rapidly, making up around 5% of total demand at the moment, it says the growth isn’t enough to offset a slowdown in traditional sectors like construction.

The report notes China’s strict zero-Covid policy has hurt the country’s construction sector and has weighed on demand for nickel. Rising output in Indonesia will also pressure nickel prices next year, ING adds.

Citing data from USGS, it says Indonesia is expected to produce between 1.25-1.5 million t of nickel this year, more than 40% of global mined production estimated at 3-3.2m t.