• ·        Global nickel market surplus to widen, putting pressure on prices.
  • ·        Nickel prices on the London Metal Exchange down 38% this year.

The International Nickel Study Group (INSG) has released its latest update on the global nickel market, revealing that the surplus is expected to expand in 2024. This news comes as prices for nickel on the London Metal Exchange (LME) have plummeted by 38% this year. Bindura Nickel Corporation (BNC), a prominent nickel producer in Zimbabwe, reported a significant revenue loss for the fiscal year ending on March 31, 2023 partially attributed to the decline in global prices.

According to the INSG, the global surplus of nickel is projected to increase to 239,000 metric tons in 2024, up from 223,000 tons in the current year. This development indicates a growing imbalance between supply and demand in the nickel market. The surplus can exert downward pressure on prices, potentially impacting the profitability of nickel producers worldwide.

The decline in nickel prices on the LME, which have fallen by 38% this year, underscores the challenging environment faced by nickel producers. Several factors have contributed to this situation, including the surge in production of lower-grade "Class 2" nickel in Indonesia. The availability of this lower-grade nickel has affected the overall pricing dynamics of the market. As a result, higher-grade "Class 1" nickel, which is deliverable against LME contracts, has faced increased price pressure.

Bindura Nickel Corporation, one of Zimbabwe's leading nickel producers, reported its weakest financial performance in a decade. The company's revenue for the 12-month period ending on March 31, 2023, experienced a significant decline of 33%, amounting to US$49.5 million. This revenue loss was attributed to reduced sales volumes, which in turn stemmed from decreased production levels. Strategic failures and other factors also contributed to BNC's poor financial results. The company is in the process of replacing its bull gear which will likely assist in ramping up volumes, regardless of projected poor prices.  

The recent update by the International Nickel Study Group points to a widening surplus in the global nickel market, signalling potential challenges for nickel producers worldwide. With prices already experiencing a significant decline, the industry faces additional pressure as the surplus is expected to expand in 2024. Bindura Nickel Corporation's financial struggles in Zimbabwe highlight the difficulties faced by nickel producers, with decreased sales volumes and strategic failures impacting their bottom line. Investors and industry observers will need to closely monitor market trends and adjust their strategies to navigate the evolving dynamics of the nickel market.

Commodities Perspective Corner is a weekly publication focusing on general commodities from Agriculture, Energy to Metals. The column seeks to highlight global developments narrowing down their impact on the local economy and vice versa.