Nickel prices to come off highs in 2021, Fitch Solutions says

NICKEL PRICES are expected to come off current highs in 2021 as more supply becomes available to the market, but will be underpinned by recovering economies, Fitch Solutions Country Risk and Industry Research said.

In a report, Fitch Solutions upgraded its 2021 average nickel ore price forecast to $15,750 per ton, from $15,250 previously.

“Prices over the past few months have progressed to multi-year highs on the back of increased optimism in the market, a weakening dollar and bullish expectations about nickel supply,” Fitch Solutions said.

According to Fitch Solutions, the current nickel price is about $18,180 per ton, but will drop as supply increases in key markets.

“The end of the rainy season in the Philippines will allow the resumption of nickel mining activity to feed nickel pig iron (NPI) facilities in China, its dominant nickel ore trading partner,” Fitch Solutions said.

“We are maintaining our bearish outlook on prices in 2021 compared with the year-to-date average of $18,140 per ton as increasing supply over the year reduces the market deficit, maintaining lower prices,” it added.

Over the long term, Fitch Solutions sees nickel prices remaining on a gradual uptrend with the global market remaining undersupplied.

It said demand is expected to be sustained due to continued growth in domestic construction and autos industry production in China.

“We forecast China’s construction sector to grow by an average of 3.8% year on year over 2021-2029 while vehicle production grows by an average of 1.2% over the same period. The rise in demand will exceed production growth in the short term, underpinning a prolonged deficit in the market and push prices higher,” Fitch Solutions said.

Fitch Solutions also projected that the electric vehicle (EV) market will create more nickel demand due to the need for batteries enabling longer range.

“We expect this trend to begin taking hold over the coming years as consumers favor EVs with longer driving distance capabilities before recharging, making nickel-based battery compositions the optimal choice for vehicle producers,” Fitch Solutions said.

Asked to comment, Chamber of Mines of the Philippines Chairman Gerard H. Brimo said in a mobile phone message that the industry could benefit from policy changes that will allow the Philippines to service demand from electric vehicle battery makers.

“While the Philippines is a top nickel ore producer, we only have two processing plants that produce nickel and cobalt sulfide concentrates — intermediate products that are further processed in Japan to make electric vehicle (EV) batteries,” Mr. Brimo said.

According to Mr. Brimo, the two plants are run by Coral Bay Nickel Corp. in Palawan and Taganito HPAL Nickel Corp. in Surigao del Sur.

“To enable our country to become a fully integrated EV battery supplier, certain policy changes have to be made, among them the lifting of the moratorium on new mining projects that has been in place for nearly a decade,” Mr. Brimo said.

“The industry needs full government support in terms of stable mining and investment policies that do not change mid-stream,” he added.

The value of the metallic mining industry’s output in 2020 rose 1.13% year on year to P132.21 billion, according to the Mines and Geosciences Bureau (MGB).

The MGB said nickel ore and its by-products accounted for 51.8% or P68.48 billion. The volume of direct-shipping nickel ore — the form in which the metal is exported for processing overseas — rose 3.3% year on year to 333,962 metric tons (MT).

Meanwhile, production of mixed nickel–cobalt sulfide fell 2.9% year on year to 49,647 MT. — Revin Mikhael D. Ochave