Nornickel raises estimate of nickel surplus in 2022 to 75,000 tonnes, affirms palladium forecast

MOSCOW. Aug 3 (Interfax) - Nornickel has raised its estimate for the surplus on the nickel market in 2022 to 75,000 tonnes and expects this surplus to widen to 150,000 tonnes in 2023.

However, the surplus is expected to be mostly in low-grade nickel, on the back of the ramp-up of new nickel pig iron (NPI) capacities in Indonesia alongside growing production of nickel chemicals, Nornickel said in a press release.

Nornickel previously forecast the surplus at 40,000 tonnes this year and 100,000 tonnes in future.

The company expects primary nickel demand to increase by 8% and 12% year-on-year in 2022 and 2023, respectively, primarily driven by the expansion of stainless steel production in China and Indonesia amid a post-Covid recovery, as well as ongoing strong growth in the battery sector.

Primary nickel supply will increase by 18% and 14% year-on-year in 2022 and 2023, respectively, owing to the continuing ramp-up of NPI projects in Indonesia and growing production of nickel chemicals through NPI-to-matte conversion and HPAL nickel recovery for the electric vehicle (EV) sector, the company forecast.

"We note, however, of the risks that energy issues in Europe and slower growth rates in China may jeopardize demand recovery in major nickel-consuming industries, thus leading to larger than expected market surpluses," Nornickel said.

In the longer run, Nornickel said it believes nickel demand will benefit from the fast growing EV sector on the back of the global decarbonisation and energy transition trends, which are actively supported by government incentives all over the world. The company expects nickel consumption in batteries to grow to more than 1 million tonnes by 2030, representing about 30% of total nickel demand.

As for palladium, Nornickel still expects this market to be balanced this year and in 2023.

The recovery of the automobile industry in the second half of 2022 should lead to a 2% increase in annual palladium demand, while supply is expected to grow by 2% year-on-year as supply losses in South Africa and North America will be offset by Nornickel production recovery from last year's low base and an increase of recycling volumes, the company said.

Nornickel expects industrial palladium consumption to increase 2% year-on-year to 10 million ounces as the automotive sector should recover partially from the severe supply chain disruptions of previous periods. At the same time, smaller palladium consuming industries are expected to reduce offtake slightly - by 3% for electronics and 4% for the chemical industry - due to the general slowdown of economic activity.

Global primary refined palladium output will fall by 1% to 6.9 million ounces in 2022 due to the high base effect of 2021, when South African miners refined previously accumulated work-in-progress materials, Nornickel forecast. On the other hand, palladium recycling from spent catalysts and other secondary supply sources is expected to grow by 9% to 3.2 million ounces this year, the company said.