Q3 Nickel Market Overview

Nickel prices are expected to face downward pressure in the third quarter due to sluggish demand from the key downstream sectors of stainless steel and batteries. This bearish sentiment follows a period of volatility, with the London Metal Exchange (LME) three-month nickel price falling to $17,205/mt on July 11 from a peak of $21,615/mt on May 20.

Headwinds from the Stainless Steel Sector

The primary driver of this weakness is the stainless steel industry, which accounts for the majority of global nickel consumption. Major producers in China and Indonesia have announced production cuts in response to weak market conditions and squeezed profit margins.

For instance, some Chinese stainless steel mills are planning to reduce their output of 300-series stainless steel by at least 10% in July. This reduction in demand for nickel as a raw material is a significant factor weighing on prices. The choice between different grades, such as in a comparison of Inox 201 and 304, often depends on nickel content and price, further highlighting the metal's importance.

Battery Sector Slowdown and Supply Glut

The battery sector, once a promising growth area for nickel demand, is also experiencing a slowdown. Demand for nickel sulfate, a key component in electric vehicle (EV) batteries, has been weaker than anticipated. This is attributed to high inventory levels and a slower-than-expected uptake in EV sales in some regions.

Compounding the demand issues is a persistent supply glut. Indonesian production of nickel pig iron (NPI) and nickel matte continues to flood the market. This abundant supply ensures that any potential price rallies are likely to be short-lived, as producers can quickly increase output to meet demand.

Market Outlook

Analysts predict that the LME nickel price will likely trade in a range of $16,500 - $18,500/mt during the third quarter. While a slight recovery is possible towards the end of the year if demand picks up, the immediate outlook remains bearish. The market will be closely watching production figures from Indonesia and demand signals from China's construction and manufacturing sectors.

Source: Based on analysis from S&P Global Commodity Insights.