Brazilian nickel supply 'not enough' to avoid global shortage
At the moment, nickel supply from Brazil, where mining giants Vale and Anglo American are the largest producers, has only a relatively small role in helping offset expected shortages following the Indonesian ore export ban recently announced.
"You will also need to consider the shipping costs from South American ports to the biggest consumer – China compared with Indonesia or the Philippines, which are much closer to China," Wenyu Yao, senior commodities strategist at Dutch financial services and insurance group ING told BNamericas on Monday.
Vale's nickel production reached 45,000t in Q2, down 32% year-on-year.
About 3,900t of Vale's mined nickel comes from its Brazilian operation, Onça Puma, where output dropped 30.4% year-on-year. Compared to Q1, output was down 9.3%.
Furthermore, nearly half of Vale's nickel comes from Canada, with a smaller portion produced in the company's operations at Nfew Caledonia.
Wenyu said that last year Canada contributed around 8% of global nickel mine supply and its output has seen a 15% year-on-year decline.
"New Caledonia is helping... but we don't think Canada and Brazil could do much help in the short term in light of the supply gap that Indonesia's ore export ban will cause to the global market," Wenyu added.
Brazil is the world's eight largest nickel producer.
The Asian nation announced on Friday an export ban on nickel ore from the beginning of 2020, bringing forward the planned export restrictions by a full year.
The measure is intended to support the domestic processing industry, but it could result in huge supply losses for the global nickel market in the short term as domestic smelting capacity is still not sufficient to fully process the nickel ore produced in the country, ING said in a research report on Monday.
"In terms of ore supply, the major growth we see for next year is expected to be coming from New Caledonia as a result of [French mining and metals firm] Eramet's SLN project. Otherwise, a higher supply of nickel would be coming from NPI [nickel pig iron]," Wenyu said.
"As a result of Indonesia's ore export ban from the start of 2020, we think the NPI projects within the country could speed up next year. Currently, we are forecasting Indonesia NPI productions to surpass China in 2020 for the first time by around 100kt," she added.
The big picture is that the nickel market has seen two years of deficits and, given a limited pipeline of projects in the non-high quality segment of the market, it is likely that the market will remain in an overall deficit for some time, Kieran Clancy, assistant commodities economist at UK-based Capital Economics, told BNamericas on August 15.
It does not seem likely that nickel supply will increase in the short term, said Clancy, adding that the rise of electric vehicles (EVs) has seen a bifurcation of the nickel market's supply side.
"To this end, it helps to view supply in two segments, namely high-quality nickel, catered specifically to demand from the EV sector and non-high-quality nickel, which is used mostly to supply mills who produce stainless steel, particularly in China," said Clancy.
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