By Mai Nguyen
HANOI, Feb 4 (Reuters) - The coalition government in New
Caledonia, a French territory in the Pacific that is the world's
fourth-largest nickel ore producer, collapsed on Tuesday after
pro-independence politicians resigned. Riots broke out in December sparked by protests led by
pro-independence political parties over the sale of Vale SA's
VALE3.SA nickel business in the country. Here is what that means for the global market for the metal
used to make stainless steel and batteries for electric
vehicles.
HOW BIG A NICKEL PRODUCER IS NEW CALEDONIA?
New Caledonia is the world's fourth-biggest producer of
mined nickel, behind Indonesia, Philippines and Russia. It
exports ore mainly to South Korea, Japan and China.
The country accounts for roughly 9% of global mined nickel
output, and produces roughly 200,000 tonnes per year, according
to the International Nickel Study Group (INSG).
The French territory is also the third-biggest nickel ore
and concentrate supplier to top metals consumer China.
WHAT IS THE NICKEL MARKET BALANCE?
The latest INSG forecast, released last October, pegs the
global refined nickel market at a 68,000-tonne surplus this
year, down from a 117,000-tonne surplus in 2020. Consultancy Wood Mackenzie, however, estimates the surplus
could trim to 25,000 tonnes this year as the global economy
rebounds and demand for electric vehicles and batteries picks
up.
"This year, we are looking at a much more balanced nickel
market – potentially even moving to deficit in Q3 briefly," said
Andrew Mitchell, head of nickel research at Wood Mackenzie.
HOW IS NICKEL DEMAND AND SUPPLY IN CHINA?
China is the world's biggest nickel consumer, with its
mammoth steel and manufacturing sectors accounting for over half
of global primary nickel use, INSG data showed.
The country consumes roughly 1.3 million tonnes of primary
nickel a year.
However, Chinese inventories of nickel ore have declined
sharply following an ore export ban from top producer Indonesia
since 2020.
This has led to a drop in nickel ore stored at Chinese ports
to a near record low of 7.7 million wet tonnes as of Jan. 19,
according to data from consultancy Antaike.
Refined nickel stocks in Shanghai Futures Exchange
warehouses SNI-TOTAL-W are at their lowest since June 2019, at
9,902 tonnes.
To compensate for the supply drop from Indonesia, China
boosted its imports of ore and concentrate from New Caledonia.
Shipments from there during January to November 2020 rose by
65.7% from a year earlier, INSG data showed.
WHAT IS THE OUTLOOK FOR PRICES?
It is unclear whether New Caledonian supply will be impacted
by the coalition collapse so prices have largely moved sideways
since the news emerged.
Analysts have yet to factor in any supply disruption from
the government breakdown, although a burgeoning independence
movement and acrimony over how to manage resources suggest the
potential for a protracted disruption to normal services.
While other countries may ramp up shipments to fill any
supply gap from New Caledonia, a tight market in China and
recovering demand elsewhere will likely keep nickel prices well
supported this year, said three trade sources.
Benchmark London Metal Exchange nickel prices CMNI3 gained
18.5% in 2020, and are up roughly 6.2% in 2021.
"Apart from the boost provided by stronger stainless steel
demand from China, we have additionally seen supply shortage
concerns provide support to the price over recent months," said
Jack Anderson, a senior analyst at consultancy Roskill.
"It is very possible that further supply shortage concerns
will exacerbate those fears in the market and continue to lend
support to the LME price," Anderson said, forecasting average
2021 nickel price at $16,450 a tonne.
Wood Mackenzie's Mitchell predicted the LME nickel price
this year will peak at $21,000 a tonne around the third quarter
before easing off towards 2022.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Nickel mine production https://tmsnrt.rs/3aBr0jC
Nickel uses https://tmsnrt.rs/3tqDH9O
Low supply and strong demand in China have been supporting
prices of nickel https://tmsnrt.rs/39Mr0y1
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>