Mixed messages muddy nickel price forecasts

A senior Indonesian official has warned the nation has little interest in letting nickel prices rise above $US18,000 per tonne as analysts send mixed signals around the beleaguered battery metal’s revival.

The nickel price on the London Metals Exchange has enjoyed a 13 per cent bounce in the past month to about $US17,500/t.

That small recovery, still well below $US30,000/t it was worth at the start of 2023, has been met by a promising forecast from Macquarie Bank after a trip to China reportedly revealed nickel consumption had been underestimated.

Following the trip, Macquarie revised its Chinese consumption estimate up 17 per cent to 2.1 million tonnes.

That prediction came as BHP mulls the future of its Kalgoorlie nickel smelter – and the 3,000 jobs attached to it – and the federal government considers production tax credits and other measures to sandbag the sector.

Indonesian deputy of investment and mining coordination, Septian Hario Seto, said the current nickel price allowed healthy margins for the nation’s miners and fair prices for value-add companies.

“We are aiming to build the downstream industry,” he said.

“This is how we differ compared to Australia; our intention is to build the industry from upstream to downstream.

“If the nickel price is too high, the price of the batteries would be expensive, leading to more expensive EVs.”

While reportedly sustainable for Chinese-backed Indonesian miners and smelters, the depressed nickel price has forced severe cutbacks in Australia’s nickel sector.

That includes the mothballing or curtailment of five major operations including the Ravensthorpe nickel operation and Wyloo Metals’ Kambalda mine.

WA’s other major nickel mine – the Glencore-operated Murrin Murrin – remains at full capacity with no indication yet of cutbacks.

Australia’s call for the LME to introduce a green premium contract for sustainably sourced nickel was on Wednesday quashed by the agency.

Goldman Sachs has taken an opposing view to that of Macquarie, forecasting a lengthy bear market for nickel and lithium.

The global finance house predicted a further 15 per cent slump over the next 12 months due to substantial supply, reduced demand from China, and reduced EV demand.

Some commentary out of Indonesia in February had suggested the nickel price collapse could be impacting profitability of the nation’s miners as well.

The flooding of the market with cheap nickel from Indonesia, often with lax ESG credentials, is widely seen as the main driver of the metal’s price collapse.