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A Question of Class

This month, Reuters columnist, Andy Home, published a piece with expectation the nickel market will face a significant supply glut this year due to surging Indonesian production outpacing global demand.

Here is the gist of the article: The International Nickel Study Group (INSG) predicts a supply-demand surplus of 239,000 tonnes, the largest in at least a decade. Despite an estimated 6.1% growth in nickel usage in 2023, it will not be sufficient to absorb the wave of new production from Indonesia.

Of note, however, the surplus is expected to be mainly due to the increased production of Class II and nickel chemicals, primarily nickel sulphate. The pricing gap between different forms of nickel is widening, with LME stocks of Class I nickel declining while surplus builds in other parts of the supply chain.

The demand for nickel from the electric vehicle (EV) battery sector is helping to compensate for the weak stainless steel sector. Indonesia's nickel mine output has been rapidly increasing, with a 48% growth in 2022 and another 44% in the first two months of this year.

The article suggests that as Indonesian operators close the processing gap between Class I and II forms of nickel, the pricing gap may start to close as well. However, this has not yet occurred.

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