The price of nickel was wildly volatile in 2022, with the European spot price surging to an unprecedented intraday US$100,000/t in March. The price was then capped at US$45,721/t, and trading was forcibly suspended on the LME for nine days as the market recovered.
Although this
incident was primarily caused by the large volume of short positions held by
Tsingshan Holding on the exchange, looming uncertainties induced by Russia’s
invasion of Ukraine was also a major trigger.
Nornickel, Russia’s nickel and
PGM giant, is responsible for the production of over 10% of the world’s class 1
nickel supplies. Potential disruptions to its production and deliveries have
caused both investors and downstream producers to panic as they scramble to
secure alternative feeds while fearing a market deficit.

In the June quarter, prices began recovering as manufacturers adjusted to new geopolitical
relations between Russia and the West. The talk of implementing sanctions on
Russia production, however, continues to elevate prices, with the quarter
average ending at an all-time high of US$29,069/t.
The volume of contracts
being traded on the LME has also almost halved, compared to the start of 2022. Investors
were wary of the nickel market, with some believing that LME’s decision to
suspend trading was a mistake.
Prices then
calmed quicker than expected in the September quarter, bringing the quarterly
average back to US$22,006/t. Skyrocketing energy prices in Europe, as a result
of faltering trade ties with Russia, led to reduced finished nickel demand, as
stainless-steel mills were forced to shut down. Prices were forecast to
continue easing as market uncertainties subsided.
In the
December quarter, prices returned to an upward trajectory, caused by rising
tension between countries along supply chains as demand from the EV sector
rose. The threat of Russian disruptions has exemplified the fragility of a
global critical minerals supply chain. EV manufacturers realised that raw
materials need to be secured early, while the supply chain also needed to be
domesticated to ensure control.
This theme of resource protectionism is echoed
by the US’ Inflation Reduction Act, which will only grant a US$7,500 tax credit
to EVs manufactured with materials that are over 40% sourced domestically or
from a free-trade agreement ally. Finished nickel consumers will become
increasingly selective of the source of origin.
Although the
global market is forecast to be in a massive surplus of 192kt in 2022, this has
had little effect in restraining prices. Prices started at ~US$20,000/t at the
beginning of the year but ended closer to US$30,000/t by the end
of December.
This is due to the fact that supply growth will come predominantly
from Indonesian smelters, which produce ferronickel, a low-grade product that
is used for stainless-steel, instead of the quickly growing battery sector,
despite the latter only contributing to ~10% of finished demand. Hence, prices
continue to remain detached from physical market demand and supply conditions.
Major Producers
Indonesia
The 2022 surge in finished nickel production is
largely attributed to Indonesia, who is responsible for 38% of total global
production. New RKEF smelters being brought online, and their ramp ups, have
propelled unprecedented capacity growth. This has caused ferronickel exports to
increase dramatically over the year, from just below 400kt in January to a
monthly high of approximately 600kt in September. 97% of this was exported to
China, going into its stainless-steel industry.
The implementation of the proposed export tax
on nickel products below 70% grade will further drive processing and downstream
development, as producers integrate their operations to minimise production
costs.
Despite the WTO ruling against the country
concerning its 2020 ore export ban, claiming that the move was in violation of
the General Agreement on Tariffs and Trade, Indonesia remains undeterred. The
Ministry of Investment has stated that an appeal will be filed, and that the
ban will remain. A similar policy may even be implemented on other raw
materials such as bauxite.

A series of smelters were brought online in
2022 as Indonesian processing capacity continues to be built out. Notable RKEF
projects include Nickel Industries’ Angel and Oracle smelters within the IMIP.
Both operations are expected to produce at 130% of their stated 36ktpa nickel
in ferronickel capacity when their captive 380MW coal-fired power plants come
online.
Delong Holdings’ Gunbuster operation in the Virtue Dragon Industrial
Park is also a massive ferronickel operation that was commissioned in 2022.
These projects are expected to have quick ramp ups as the RKEF technology
deployed are very similar.
New MHP producing HPALs include Tsingshan’s
QMB, and Huayou Cobalt’s Huayue plants, also within the IMIP. Production may
even be further processed into sulphates to cater for the battery sector.
Nickel Industries’ Hengjaya smelter also transitioned to the production of
matte instead of ferronickel to capitalise on the ballooning batteries market.
China
In China, finished nickel production has been
affected by mandated lockdowns and energy supply issues in Shandong and
Guangdong. Despite the implementation of stimulus measures, economic
activities were restrained through the year due to persisting lockdowns.
Additionally, NPI
plants in the Beijing, Tianjin and Hebei regions were suspended at the
beginning of the year due to the government’s mandate to improve air quality
for the Winter Olympics. The lack of high-grade mines in China also made it
highly reliant on imported ores from the Philippines and New Caledonia.
Philippines
A four-year mining ban was lifted at the end of
2021, allowing several smaller scale mines to resume production. Projects that
restarted production this year include Eramen Mineral’s Sta. Cruz project, and
ARC Nickel Resources’ Banaybanay operation. However, the Governor of Davao
Oriental is recommending the permanent closure of Banaybanay, following heavy
siltation pollution in nearby rivers.
Ipilan Mining Corporation, an affiliate of Global
Ferronickel Holdings, also commenced ore production from a greenfield site at
Ipilan. The site will be a DSO operation and can be mined year-round, as
activities are not affected by the rainy season due to its location.
Canada
Production has remained relatively stable this
year, with exports climbing to over 20kt towards the end of the year as demand
for high-grade products rose. 38% of all unwrought production was exported to
the US for its EV battery cathode production.

Canada has intensified the regulations on large
foreign state-owned investments in its critical minerals sector. Acquisitions
of Canadian businesses worth over C$1.141bn (US$0.83bn) will require an
exceptional approval. This act will allow the government to better control
Canadian nickel production and ensure a stronger strategic alliance with its
trade allies in North America and the rest of the world.
Australia
IGO Limited
has completed the full acquisition of Western Areas, adding the Cosmos and
Forrestania mines to its nickel portfolio. On the other hand, production at
Nova had to be suspended in December following the breakout of a fire at its
captive 10MW diesel plant. IGO confirmed that no staff were injured, and that
production will resume in mid-January 2023.
Oz Minerals
is reconsidering BHP’s takeover bid of A$9.6bn (US$6.7bn) after rejecting an
unsolicited A$8.4bn (US$5.9bn) bid in August. If successful, BHP would gain
ownership of the West Musgrave project, a large-scale greenfield nickel copper
deposit.
Additionally, the Avebury mine in Tasmania has
been resurrected by Mallee Resources after an idle period of 13 years. While
Mincor Resources has commenced mining operations at its Cassini and Northern
Operations, with concentrates being toll produced at BHP’s Kambalda
concentrator.
Demand Developments
Global energy
transition efforts are fuelling rapid demand growth for battery-grade nickel
products. However, the dominant source of demand continues to be
stainless-steel and other alloys, accounting for almost 90% of total finished
demand. China, the largest demand source in the world, accounted for over 57%
of global demand in 2022.

Demand was
slow in the first two Quarters of 2022, with stainless-steel operations in
China affected by pandemic induced lockdowns. Even EV manufacturer Tesla
revealed that in the March Quarter, 50% of the EVs produced used the
nickel-free LFP batteries for its Model 3s. The company plans on further
diversifying its portfolio of battery compositions to avoid overreliance on any
one metal.
By mid-2022,
deteriorating relations with Russia began restricting energy supplies flowing
into Europe. Aperam’s largest stainless-steel plant in Genk, Belgium, had to be
shut down as the result of soaring energy prices. Production at Charleroi also
had to be scaled back. Similar problems occurred in Spain, in which Acerinox
recorded a 22% reduction in quarterly production. Europe is the only region
that saw a decline in demand in 2022 because of this.

Finished
nickel demand continued growing in the September and December Quarters, thanks
to the resumption of stainless-steel production in China, and new developments
in the battery sector.
CATL,
the largest lithium-ion battery manufacturer in the world, unveiled its newly
developed Qilin battery in August. The integrated battery is capable of
carrying up to 255Wh/kg with a high nickel composition. This battery will be
mass produced in 2023 and will be launched with the Zeekr 001 and Zeekr 009
EVs.