TOKYO -- Nickel, a metal used in stainless steel, is forecast to be in short supply in 2016 for the first time in six years due to a combination of slow production growth worldwide and robust demand from the construction and automobile industries.
Statistics from the International Nickel Study Group reveal a tightening of supply and demand since April. At the end of April, the supply-demand forecast for 2016 was for a shortage of 48,800 tons as production was seen declining 3% from the prior year to 1.91 million tons, the second straight year-on-year decrease, while consumption was projected to rise 3% to 1.96 million tons. Actual worldwide nickel demand announced in mid-June showed a shortfall of 10,000 tons for the month of April alone.
International prices on the London Metal Exchange are at around $10,000 a ton, up 31% since a low in February on signs that the market bottomed out after sluggishness since 2014. The net long position of funds trading nickel on the LME is 50,100 lots, 2.8 times as many as at the start of the year. One nickel lot is 6 tons.
Indonesia, which until 2013 accounted for 30% of global nickel ore production, switched to smelting the ore and exporting partially processed metal. The nickel market soared in the first half of 2014 when ore exports were banned, but has dropped since, prompting production cuts.
The Philippines became a leading alternative to Indonesia, but new president Rodrigo Duterte, who was inaugurated at the end of June, has ordered two mines to halt production, citing environmental damage.
On the demand side, China, the world's largest consumer of the metal, imported a record quantity in April as stainless steel production rose. Not only is stainless steel in high demand in the housing industry, it is increasingly used in automobile batteries and aircraft as environmental regulations grow tougher around the world.
Many are of the view that over the next five years nickel shortages will persist and inventories will decline.