The global nickel market is facing a sustained period of oversupply, according to one of the world’s largest nickel producers.
Norilsk Nickel, the largest nickel producer in Russia has again revised its estimate for the market surplus upwards, predicting a supply surplus of 200,000 tons for both this year and next.
This new estimate for the current year is roughly on par with that of the International Nickel Study Group (INSG). However, the company’s projection for next year remains 60,000 tons lower than the INSG’s forecast.
Despite seeing robust demand growth, particularly from the stainless steel industry, the dominant factor remains the rapid supply expansion in Indonesia.
“Supply expansion in Indonesia is still continuing at a rapid pace,” said Barbara Lambrecht, a commodity analyst at Commerzbank AG.
The measures introduced by the Indonesian government to curb oversupply and improve sector governance, including tighter license oversight and adjustments to mining quotas, are unlikely to have much effect in the short term.
The persistent oversupply suggests a difficult period ahead for the metal. “The nickel price is likely to close lower for the third year in a row,” Lambrecht said.
Copper production rises, political shift in Chile
In contrast to the nickel market, the copper price saw a recent uptick, interpreted by some as a counter-movement to significant losses earlier in the week.
However, underlying news has tended to weigh on prices.
Peru, the world’s third-largest copper-producing country, saw a 4.8% increase in production in October compared to the previous year.
This surge indicated a recovery in the nation’s output, as “The increase was higher than in the first 10 months overall, indicating a recovery in production,” Lambrecht added, leading to an overall 3% increase compared to the same period last year.
Further impacting the outlook is the political landscape in Chile, the world’s top copper producer. Right-wing conservative candidate José Antonio Kast won the presidential runoff election and is set to take office in March next year.
Kast is “considered a neoliberal in terms of economic policy and is likely to pursue a more business-friendly course than his left-wing predecessor, who focused on environmental and social issues.”
Lambrecht said:
However, he will have to coordinate his course with Congress, where he does not have a majority.
Iron ore demand hit by Chinese property crisis
The Chinese property market crisis continues to cast a long shadow over global demand for iron ore, which is essential for steel production.
The market has been in distress since 2021, following government measures introduced in 2020 to address over-indebted property developers.
The impact on steel is direct and significant.
“It is no coincidence that Chinese steel production peaked in 2021 and has been in decline ever since,” noted Volkmar Baur, FX and commodity analyst at Commerzbank.
The construction sector globally accounts for around 50% of steel use, with Chinese high-rise buildings being a major historical driver of global steel demand.
Baur weighed in on the duration of the downturn:
Our economists now assume that the correction in the Chinese property market is only halfway through.
While they expect the pace of the correction to slow, Baur pointed out that “Construction starts in China have already slumped by 70% since 2021.”
It is likely to take “several more years before the bottom is truly reached,” which means “the Chinese real estate sector is likely to continue to weigh on global steel demand for several more years.”
Though a sharp rise in Chinese automobile production has absorbed some slack—rising by 30% over the last four years—a “similarly strong increase in the coming years therefore seems unlikely.”
As a result, Baur concluded, “Globally, steel production is likely to decline in 2025 compared to the previous year. If the Chinese property market remains weak, this is unlikely to change in 2026, which will inevitably weigh on the price of iron ore.”
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