Posted on 18 Nov 2025
Current nickel prices are not sustainable in the medium term as most producers cannot cover costs, but the market is unlikely to rebalance in the near term, warns Macquarie.
According to the Australian bank, as much as 40% of the nickel industry is cash flow negative if LME prices hover around $15,000/tonne. This is driving some producers who are making marginal losses to raise output to lower unit costs.
“The most likely near-term cost could come from Indonesian nickel pig iron (NPI)/matte, especially if ore supply gets tight, forcing ore prices higher,” the analysts say in a note seen by Kallanish. “In any case, a quick rebalancing of the market seems unlikely in the near term.”
Surpluses are being absorbed in part by strategic stockpiling and are going into LME warehouses, which “could continue for a number of years,” as seen in the aluminium market in the past, the analysts say.
“Financial players with access to cheap warehousing and finance can make a risk-free return by utilising the LME contango,” they add, referring to when the futures price for a metal traded on the exchange is higher than its current spot price.
The oversupply initially started in NPI in 2022, driven by a large expansion in Indonesia, with most of the processing capacity built in China. From around 30% of global refined supply in 2015, Indonesian and Chinese production now account for nearly 80%.
Traditionally, NPI and ferronickel prices traded at close to the LME price or sometimes a premium, but collapsed well below LME prices due to the oversupply. Loss-making Chinese producers and companies that were not integrated with stainless steel production ended up closing their projects.
Macquarie estimates that closures in the past five years amount to over 500,000 t/year of capacity, half of which are nickel-iron units. Discounts have now narrowed to $1,000/t for ferronickel and $3,500 for NPI, from ranges of $5,000-10,000/t previously.
NPI prices are now supported by the marginal cost of production at around $11,000-11,500/t, analysts at Macquarie note, while LME prices “have a degree of support” from the $15,000/t or so needed to justify converting NPI to LME grade metal. However, the growing production of lower-cost mixed hydroxide precipitate from high-pressure acid leach plants will eventually eliminate the flow of NPI to metal, the analysts warn.
The LME three-month closing nickel price was $14,981/t on Friday.
Source:Kallanish
