Production, usage and prices
The question of whether the natural resources of the planet are in danger of being exhausted is sometimes raised. In the case of nickel there appears to be little reason for concern. Nickel is the fifth most common element found on Earth. Only iron, oxygen, silicon and magnesium are more abundant. However, the reserves that can be economically mined are of course more limited. Nickel reserves refer to proven reserves in land based deposits. Nickel resources (estimated at twice the amount of nickel reserves) encompass sub-economic reserves, i.e. not mineable at a profit. The development of new process technologies will result in the conversion of some resources into the reserve base. Ongoing exploration continues to add to both bases. According to some sources, nickel resources on the sea-bed are many times those located on land. The land resource base is thought to be in excess of 100 years at the present mining rate.
Usage of nickel has increased over time and is correlated with economic development. World nickel demand increased from 907 thousand tonnes in 1990 to 1.465 million tonnes in 2010, an annual average growth rate of 2.3%. Since then the strong growth recorded by the Chinese economy has further accelerated the increase in nickel demand that recorded in only six years, from 2010 up to 2015, an annual growth rate of 5.0%. Asia is now by far the largest regional market for nickel currently representing 71% of total world demand. China alone now accounts for close to 52% of world nickel demand compared with18% ten years earlier.
Because nickel is usually recycled, a distinction is often made between the use of newly produced metal and recycled scrap. ‘First use’ refers to the destination of newly produced nickel. By far the most important use of new nickel is the production of stainless steels. This use accounts for close to two thirds of first use nickel up from one-third in the past three decades. The market for stainless steel is growing at the rate of about 5% per annum. Other sectors of first use include other alloyed steels, high nickel alloys, castings, electro-plating, catalysts, chemicals and batteries.
Strong world economic growth until 2007 supported rising production of primary nickel metal. In 2007 world primary production stood at 1.411 million tonnes. However, the economic crisis led to lower worldwide nickel production in the period 2008 to 2009 and production of primary metal declined to 1.316 million tonnes in the latter year. Production rapidly recovered in 2010 to 1.442 million tonnes and increased further to 1.602 million tonnes in 2011. On an annual average the growth in production between 2001 and 2011 was 3.1%. A new product - nickel pig iron (NPI) - started to be produced in China in 2005 in different forms and grades. Production increased slowly in the first few years but in 2010 production was estimated at over 160,000 tonnes and in 2015 at about 390,000 tonnes. Basically all of this product is used domestically in China in the production of stainless steel and has replaced traditional products like nickel metal and stainless steel scrap. In addition to new NPI production in China, several other nickel projects around the world started. Examples are Barro Alto and Onça Puma in Brazil with a combined capacity of about 95,000 tonnes per annum when in full production. In Madagascar the Ambatovy project with a capacity of 60,000 tonnes has started operations. Myanmar has its first nickel project in Tagaung Taung, which started production in 2013. In New Caledonia, Vale’s Goro project with a capacity of 57,000 is currently in a ramp up phase. The world primary nickel production totalled 1.983 million tonnes in 2014 reaching in the period 2011-2015 an annual growth rate of 5.5%.
Nickel Prices and Stocks
The price of nickel has shown considerable volatility over the last forty years. The chart below shows the historic LME price for nickel in nominal values from 1991 to 2016. In the late 1980s there was a peak in the price of nickel. In the first half of the 1990s the economic collapse of the former "Eastern Bloc" countries resulted in a surge of nickel exports that drove nickel prices lower than the cash costs of production resulting in reduced nickel production in the "West". Until 2003 the nickel cash price remained below US$10,000 per tonne. The price breached $14,000 per tonne in 2005 and then escalated dramatically through 2006 before peaking at $52,179 per tonne in May 2007. Nickel prices then declined until the end of 2008, when the average cash price in December hit a low of $9,678. In early 2009, nickel prices began to once again climb and reached $24,103 by the end of 2010. In 2011 the price continued up and reached the peak in February, with an average price of $28,247, and has declined since then until the end of 2013 when it stayed below $14,000. The initial reaction to the implementation of the export ban of unprocessed ores in Indonesia in January 2014, nickel price climbed to just below $20,000 in July 2014, but since then it has declined almost every month until March 2016 to be traded at around $8,700.
LME stocks of nickel were relatively stable during the period 2001 to 2005 at around 20,000 tonnes. In 2005 stocks increased somewhat and again declined in 2006. During the period 2007 to 2009 stocks rapidly increased to over 158,000 tonnes at the end of the period. In 2010 and 2011 destocking took place with stocks at the end of December 2011 at 91,000 tonnes. Since the beginning of 2012 to March 2016 a long period of stocking took place, reaching over 470,000 tonnes in June 2015. In the second quarter of 2015, the Shanghai Futures Exchange (SHFE) launched the nickel contract and stocks have been rising there to a level of 73,000 in March 2016. By the end of March 2016, the combined LME and SHFE stocks were over 500,000 tonnes.