In its new metals market review, Norilsk Nickel forecasts a continued surplus on the nickel market, a rebalancing of the copper market and a slight decline in demand for some platinum group metals (PGM).
Excerpts from the company's report are provided below. Norilsk Nickel publishes its market analysis and forecasts twice a year.
Nickel
In 2024, the global nickel market recorded the third consecutive year of oversupply. The quality of this surplus, however, has changed from low-grade nickel to high-grade, with the nickel exchange inventories rising more than twofold by over 100 kt Ni in 2024 YTD, predominantly due to the inflow of the Chinese material from the newly opened cathode capacities. Considering other off-warrant inventories and underreported stocks, the actual stockpiling of Class 1 nickel in 2024 could be as high as 150 kt Ni, with some similar volumes likely to be stockpiled in 2025, resulting in another year of oversupplied market.
Consequently, the nickel price plunged to $15,500/t by mid-2024. Regardless of news that the US Federal Reserve lowered its interest rates, China’s Central Bank unveiled the most aggressive financial stimulus since the pandemic and several producers in Australia, Indonesia and New Caledonia announced production cuts, the LME price remained subdued and stabilized at the lower end of the $15,500-16,000/t range at the time of writing.
In 2024-2025, the nickel market is expected to maintain a surplus of around 150 kt Ni, which will be mainly concentrated in the high-grade nickel sector. The commissioning of new capacities in Indonesia for the whole gamut of nickel products, including NPI, NPI-made matte, MHP from HPAL processing, nickel sulphate and Class 1, coupled with new Class 1 capacity additions in China, will be accompanied by a relatively similar increase in nickel use in general with more robust growth in stainless, alloys and special steel sectors as well as a more mature growth in the EV batteries.
Overall, around 40% of all nickel producers are loss-making at the current price, as growing Indonesian supply is weighing on other high-cost operations all over the globe, so that could be a potential upside for the nickel price. On the one hand, considering the scale of the potential supply curtailments in Indonesia (given the uncertainty with RKAB approvals, declining NPI grades, rapidly depleting high-grade ore reserves and a potential moratorium to build new RKEFs) as well as in other countries the primary nickel supply could be lower than we initially forecast. On the other, the robustness of the nickel use in the stainless steel sector and other melting applications could lead to even higher nickel use, so the nickel market could potentially become more balanced.
Copper
After peaking at nearly $11 000/t in May, copper prices have experienced a decline, settling at approximately $9 000/t by the end of November. This downward trend stems from multiple factors, including easing supply shortage fears, investor demand roll back, uncertainty around Chinese demand as well as ongoing European deindustrialization together with rising trade war concerns.
In the copper concentrate market, attention remains focused on historically low TC/RC values. Despite announced production cuts by China’s CSPT smelter alliance, actual reductions have yet to materialize, with smelting capacity expanding. An estimated 2 Mt in new smelting capacity, predominantly in China, is set to come online next year, while only 0.6 Mt of new concentrates are expected to enter the market with new mining production primarily coming from Africa and other non-core producers, driven by Chinese investments. This widening gap will likely to exert further downward pressure on TC/RC values, posing additional challenges for smelters. Spot TC values have shown slight improvement, currently standing at $10/t. The TC benchmark was set at $21.25/tonne for 2025 but it offers little relief to the industry with breakeven level for Chinese smelters of around $40/tonne, potentially leading to the closure of less efficient processing facilities.
The refined copper demand outlook looks vulnerable with the contraction of industrial production and two and a half year long pessimism among purchasing managers in Europe as well as mixed outlook in the US. Meanwhile, China’s economic indicators reflect uneven growth, with government stimulus measures so far falling short of expectations. However, in our view, the Chinese government retains room for further economic support in 2025, including monetary injections, tax incentives, and debt write-downs aimed at bolstering construction, industrial, and service sectors. Also on a positive note, demand for copper in power grid applications remains strong, driven by ongoing investments in electric network expansion and general economic shifts favouring electricity-intensive sectors.
Overall we expect the market to show a surplus of 200kt in 2024 and a balance in 2025 as copper demand growth is expected to outpace the global economy expansion in general benefiting from accelerated growth of renewable energy generation and electrified transport as well as continuing trend of higher electricity use per capita. Moreover, the global shift toward economic regionalization, protectionism, and the tendency in governmental policies to ensure self-sufficiency in critical copper-intense industries will support copper demand in the coming years. Although the huge supply gap challenge in the next decade persists but deficit concerns have eased amid positive production trends in Africa, driven by substantial investments from the Chinese.
PGMs
Since our latest issue, palladium, platinum, and rhodium prices have kept on following a side-way trend. Seemingly, this is a stalemate situation as the PGM basket price found its fundamental support as half of the South African PGM mines are unprofitable at current PGM basket price. At the same time, price increase any incentivise the recycling of hoarded spent-autocatalyst-scrap, which in turn holds back the quotes.
Palladium demand is expected to fall by 6% year-over-year in 2024. ICE-equipped light vehicles market is expected to shrink by 3% year-over-year to 77.5 million units. Even though the slowing BEV market penetration favours hybrids and benefits palladium demand, aggressive thrifting in PGM loadings by the OEMs in China, Japan and the US, offset this effect.
Palladium output is expected to decline by 1% year-over-year in 2024. Due to the much faster-than-expected smelter rebuilding Russian mine production will recover to the previous year level, while recycling is expected to decline by 5% year-over-year. Mine supply has only started to react to the recent destocking-driven palladium price fall with upcoming meaningful production cuts in North America. Having said that, these are more likely to come from South Africa.
We have revised our earlier 2024 palladium market deficit estimate (excluding investments) from 0.9 Moz to a nearly balanced state due to a stronger output from the Russian operations and the major revision of automotive demand related to lower than expected vehicle output and the PGM thrifting programmes in autocatalyst production in China, Japan and the US.
In 2025, we expect the palladium market to remain balanced as lower PGM mine production in North America and South Africa will be offset by the rebouncing autocatalyst recycling while the total demand is expected to stagnate on a year-over-year basis if no acceleration happens in response to the interest rate cuts in the Western world and economy support measures in China.
Platinum demand is also on a downward trend. Metal use in the automotive industry suffers from the diesel market shrinkage and reverse substitution for palladium as some OEMs have already substituted back platinum with palladium completely, while platinum jewellery demand is also falling, especially so in China because of the long-stagnant price. However, this is partially offset by the 0.1 Moz increase of platinum demand in other industrial applications. Meanwhile, the hydrogen economy kick-off seems to be postponed yet again due to cost challenges. All these will lead to the fall of platinum demand by 3% year-over-year in 2024.
Platinum refined production is expected to be flat this year as South African refined output will be higher than the falling mine supply as a result of incentivised efforts to reduce work-in-progress stocks.
Correspondingly, we maintain our view on the balanced state of the platinum market this year.
As for 2025, the platinum market is expected to remain nearly balanced with a small deficit appearing at 0.2 Moz. South African PGM mine production is expected to follow a downward trend amid mines’ shrinking margins, which will counterweight the falling demand.
In the longer run, stable palladium-platinum price parity is expected to be sustained as mutual Pt-Pd substitution in autocatalysts will narrow price differences between two metals, however the PGM basket price will depend on the scale of production optimisation efforts in South Africa.
Nornickel’s Palladium Centre R&D update is presented in the full version of Quintessentially PGMs report. This includes the development of palladium use in traditional PGM applications, greentech and high-tech industries.
Theodor Lisovoy, Managing Editor, Rough&Polished
