Varvara Dmitrieva: The jewelry industry of Yakutia is distinguished by its creativity, unique cultural code and conservation of traditions

Varvara Dmitrieva, Associate Professor and Head of the Department of Precious Stones and Metals Processing Technologies of the North-Eastern Federal University, told Rough&Polished about the results of the Forum of jewelry Craftsmanship and the prospects...

16 april 2024

Valery Budny: There is no strategy and legislation in Russia enabling the full cycle processing of precious raw materials within the country

Valery Budny, Head of the Jewelry Russia program and CEO of the JUNWEX media holding, told Rough&Polished about the results of the meeting and pressing issues in the precious metals and precious stones (PMPS) and the jewelry sectors.

11 april 2024

Paul Zimnisky: Natural diamonds face the risk of eroding their appeal if constantly discounted

New York-based independent diamond and jewellery analyst and consultant Paul Zimnisky told Rough & Polished’s Mathew Nyaungwa in an exclusive interview that the industry should do away with discounts. He said the industry should treat natural diamonds...

01 april 2024

Edahn Golan: Lab-grown diamond prices to continue declining

In an exclusive interview with Rough&Polished's Mathew Nyaungwa, Edahn Golan, proprietor of the eponymous Edahn Golan Diamond Research and Data, predicted that the prices of lab-grown diamonds would continue to decline, especially at the retail and...

25 march 2024

ADPA’s Ellah Muchemwa: G7 restrictions to bring extra costs from diamond mining to retail

The African Diamond Producers Association (ADPA), which has openly registered its disdain for the G7’s rough diamond trade restrictions, is of the opinion that the move will bring extra costs on all stages, from mining to retail. ADPA executive...

18 march 2024

Nornickel presents metals market review

06 june 2023

Nornickel, the world’s largest producer of palladium and high-grade nickel and a major producer of platinum and copper presents the eleventh review of the nickel and platinum group metals (PGM) markets based on the fundamental analysis of world economic and industry data.

Nickel

In early 2023, nickel has been the worst performer among base metals on the London Metal Exchange (LME). This was caused not only by a 45% price increase in 2022 and a subsequent correction, but also by worsening market fundamentals. Despite extremely low LME nickel exchange inventories, which are currently at the 2007 level and amount to less than 5 days of global use only, the LME nickel contract was down by 30% since the beginning of the year. This is primarily due to a significant surplus in the Class 2 market that occurred in 2022 and is expected to remain throughout 2023-2024, mainly owing to growing production of low-grade nickel in Indonesia. At the same time, robust demand for nickel in alloys and special steel sectors supports prices of the exchange-traded Class 1 nickel.

Overall, despite nickel demand growth, which has averaged 7% per annum since 2015, Indonesia is creating a supply glut and losing potential revenue by selling the country’s nickel resources at substantial discounts. While beneficial to consumers, especially battery manufacturers, the use of such nickel in the battery industry is not sustainable as it has an extremely high carbon footprint and other significant environmental impact. Ultimately, it contradicts the very concept of electric vehicles being an environmentally-friendly and climate-change-favourable type of transport.

We have revised our forecast for a nickel market surplus in 2023 from 110 kt to over 200 kt, with the bulk of this coming from low-grade nickel.

Our estimate for nickel demand in 2023 has been downgraded from the previously expected 3.34 Mt to 3.22 Mt (7% year-on-year growth). The revision is mainly driven by lower stainless steel production in Indonesia due to operational difficulties at one of the projects, as well as lower demand in the battery sector amid a slowdown in EV sales and higher LFP uptake. On the other hand, we raised our forecast of primary nickel use, firstly, in the stainless steel sector in China and, particularly, in Europe, where decline in 2022 production was lower than we originally expected, and secondly, in other melting applications, thanks to strong demand from the aerospace, oil & gas and military sectors.

Our forecast for nickel supply in 2023 is almost unchanged at 3.45 Mt (10% year-on-year growth) driven mainly by nickel pig iron (NPI) production in Indonesia and the commissioning of new nickel cathode capacities in Indonesia and China. This development has also led to a surplus in the previously tight Class 1 nickel market, which is expected to reach approximately 40 kt in 2023.

We forecast the nickel market to maintain a surplus of around 180 kt in 2024, with low-grade nickel still accounting for the bulk of the volume. Overall, nickel supply is likely to exceed demand in China and Indonesia in 2024, while Western markets are expected to be fairly balanced.

Nickel use remains very robust in the long run, driven by higher demand in the battery sector and renewable energy. At the same time, mass production of sodium-ion batteries for electric vehicles, also containing nickel in their cathode material, was launched in 2023, which will provide an additional source of nickel demand.

Nornickel remains the largest high-grade nickel producer with one of the lowest carbon footprints. We strongly believe that while the ESG-compliant approach to sourcing nickel will undoubtedly cause some difficulties in the short run, it will be highly beneficial both in terms of sustainability and financial performance in the long-term perspective.

Platinum Group Metals (PGM)

Over the six months since the previous report, platinum group metals (PGM) prices have remained volatile against the backdrop of declining geopolitical premium, continuing macroeconomic shocks, speculative pressure, and the impact of fundamentals, such as weak ICE-powered vehicles sales recovery and South African power problems.

The automotive sector, which contributes to over 80% of palladium use, is slowly recovering after COVID and supply chain-related shocks of 2020-2021. It will see a modest growth this year, with global passenger car sales reaching 86 million units, up 6% from the previous year. At the same time, the ICE vehicle market is expected to grow by just 3% to 76 million units in 2023, as the lion’s share of market growth comes from battery electric vehicles. Based on this forecast, we expect demand for palladium to grow by 1% this year.

Bearing in mind that the main driver of the PGM demand struggles to gain momentum this year, the risks associated with the South African primary supply and global recycling bring a downside potential for the PGM market supply.

We expect a moderate deficit in the palladium market this year. The deficit forecast for 2023 was revised to 0.2 million ounces from 0.8 million ounces due to a weaker-than-expected recovery in the car market (we cut our forecast for global ICE vehicles production by 2.5 million units) and the revision of the impact of China’s new emission rules for palladium in autocatalysts. We expect no significant year-on-year changes in palladium demand in other industrial applications this year.

In 2022 — H1 2023, palladium deficit has been offset by the use of previously accumulated metal inventories held by market participants, primarily carmakers and manufacturers of catalytic systems. At the same time, the situation is expected to change in 2H 2023, when the mass destocking is likely to end.

In 2024, if the growth of recycling resumes and outpaces demand recovery, we expect the palladium market to become balanced.

We expect the platinum demand growth to offset the primary production recovery, leading the platinum market away from the period of surpluses to a more balanced state in both 2023 and 2024.

The diesel-powered vehicles market, which is still responsible for nearly a half of platinum demand in the automotive industry, continues to shrink, especially in Europe. At the same time, the automotive production recovery and palladium-with-platinum substitution, which, however, do not seem currently to be growing noticeably on a year-on-year basis, will add extra ounces to the demand. With the narrowing price-spread between palladium and platinum in 2023 as well as the announcement of the new environmental regulation in Europe and the US and a more concentrated allocation of OEM’s and fabricators’ capital and R&D efforts towards transport electrification, we see lower appetite for catalyst chemistry mix changes in the near future.

The jewellery demand is expected to stagnate this year, while the industrial demand for platinum is expected to rise slightly by +2% on the back of the capacity expansion in the chemical and glass sectors in China.

ABOUT THE COMPANY

MMC Norilsk Nickel is a diversified mining and metallurgical company, the world’s largest producer of palladium and high-grade nickel and a major producer of platinum and copper. The company also produces cobalt, rhodium, silver, gold, iridium, ruthenium, selenium, tellurium and other products.

The production units of Norilsk Nickel Group are located at the Norilsk Industrial District, on the Kola Peninsula and Zabaykalsky Krai in Russia as well as in Finland. 

MMC Norilsk Nickel shares are listed on the Moscow and on the Saint-Petersburg Stock Exchanges, ADRs are accepted for trading on the Saint-Petersburg Stock Exchange.

The group's products are supplied to 37 countries in Europe, the Asia-Pacific region, and America. It is acquired by more than 400 partner companies. Sales offices operate in Switzerland, China and the USA.

Norilsk Nickel fully supports the 2030 Agenda for Sustainable Development and the UN Sustainable Development Goals. The company considers social responsibility and commitment to the principles of sustainable development as one of the pillars of operational efficiency and business development.
Nornickel seeks to continuously improve its activities in the areas of environmental protection, human rights, health and safety, environmental impact assessment, and biodiversity preservation. The company spent RUB 221.5 billion on SDG-linked projects in 2021.

Vladimir Malakhov, Rough&Polished