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COMMODITY Insights Bulletin - Nickel Q4, 2015 - Q1, 2016

COMMODITY Bulletin - Nickel Q4, 2015 - Q1, 2016

Questions continue to remain about demand from China, which has kept downward pressure on nickel prices and will likely continue to do so for the near future.

Daniel Ricica profile

Commodity Lead, Nickel

KPMG in Canada


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nickely q1 2016 quote


During this period we have seen some capacity removed from the market, including the Philippine Nickel Industry Association which announced that it would be reducing output by 20%, along with a reduction in Chinese NPI production during the period, however LME inventories continue to remain high causing prices to remain depressed.1

There will likely continue to be price volatility in 2016 as the market waits to see the balance between Chinese demand and global supply. Given the high cost of closing Nickel projects, significant mine closures have not yet occurred, how long higher cost projects can continue to sustain losses will remain to be seen.

Price Outlook

Nickel prices2 averaged at about US$11,839/t in 2015 — a 30 percent y-o-y decline from 2014 due to slowing economic activity in China. Despite the historically low prices and sluggish consumption growth in 2015, producers have been reluctant to substantially reduce production, considering their need to generate cash flow from new projects. 

During Q1 2016, nickel prices continued to fall reaching US$7,710/t in February 2016. During Q2 and Q3 2016, prices are expected to remain low due to reduced consumption. Another major factor hindering the rise in prices is the growing stockpiles of nickel outside of London Metal Exchange (LME) warehouses. For example, Shanghai Futures Exchange (SHFE) nickel stocks increased 33 per cent in Q1 2016 and more than six-fold from June 2015 to March 2016. Hence, prices are expected to fall significantly in 2016 by nearly 26 percent y-o-y before starting to recover gradually in 2017.

Nickel prices are expected to increase at a CAGR of 9 percent during the forecast period (2016–2020) to reach US$12,400/t in 2020, driven by strong end-user demand from the transport, infrastructure and consumer durables sectors and recovery of the Chinese economy. Growing economic activity in China will boost demand for nickel from end user segments including infrastructure and industrial development and residential housing. Additionally, in the long term, nickel producers are expected to reduce their production capacity due to sustained losses. Therefore, when sufficient production cut occurs, supply availability is expected to tighten, resulting in recovery of prices.

Nickel price forecasts 2015 2020F

Supply and Demand


  • Global nickel mine production has decreased marginally by 1 percent y-o-y to 2.1 million tons (Mt) in 2015 and may further decrease to 2.0 Mt in 2016, constrained by low prices and ore depletion. Higher production at existing mines in the US, Madagascar and New Caledonia could not offset reductions in production in Botswana, Indonesia, Russia and Australia. 
  • Mined nickel production is expected to grow at a CAGR of 4.1 percent to 2.49 Mt in 2020, since new capacity from projects under development, currently, is projected to offset planned closures.
  • Global miners are facing risk of low profitability owing to persistently low prices and higher operating costs, which may result in closures or suspensions of existing projects, or delays to the commissioning of new projects. The closure of loss making mines such as Glencore's Koniambo and Murrin Murrin projects and First Quantum Minerals' Ravensthorpe plant in Australia during Q1 2016 are few examples of initiatives by miners to sustain their operations amidst low prices.
Nickel price production 2015 2021F
  • In 2016, global refined nickel production is estimated to decrease by 2.5 percent y-o-y to 1.91 Mt, due to lower production in China. Despite low prices in Q1 2016, the drop in production has not been significant since producers focused on cutting costs and maintain existing production levels to generate cash flow and repay construction loans.  Refined nickel production is forecast to increase at a CAGR of 2.6 percent to 2.1 Mt in 2020, driven by new ferronickel, nickel pig iron and nickel matte production in Indonesia.
  • Much of the new supply growth during the forecast period (2016F–20F) is expected to be dominated by new ferronickel, nickel pig iron and nickel matte production in Indonesia. Therefore, any reductions in production from loss-making refined nickel producers are projected to be moderated by the commissioning of new smelters and refineries in Indonesia. For example, PT Sulawesi mining investments smelter was opened in Indonesia in May 2015 to process nickel pig iron. This smelter has a current capacity to process 300,000 tons of nickel pig iron per year with an investment of US$636 million. 
Nickel refined price production 2015 2021F


  • Global nickel consumption is estimated to increase slightly by 2.1 percent to 1.93 Mt in 2016 due to weak Chinese economy resulting in lower exports of stainless steel from China (partly influenced by the increased adoption of anti-dumping measures in the EU).
  • During the short term (2017F–18F), global nickel consumption is expected to increase moderately at 2.6 percent to 2Mt in 2018, supported by growing populations, increased urbanisation and an expanding middle class in emerging economies.  
  • Consumption of nickel is forecast to grow at a CAGR of 2 percent to 2.07 Mt in 2020, driven by increased steel demand along with growing applications in industrial manufacturing. By 2020, developing economies including China, India and other Asian countries are expected to invest heavily in upgrading infrastructure and expanding industrial and output capacity. 
Nickel price consumption 2015 2021F

Key developments

Ownership changes5

The total value of deals more than doubled to US$2.46 billion in Q1 2016 from US$0.18 billion in Q4 2015. The number of deals increased to seven during Q1 2016 from five deals in Q4 2015.

There has been a surge in deals in Q1 2016 despite the low prices, as producers require new projects to generate cash flow.

There has been a surge in deals in Q1 2016 despite the low prices, as producers require new projects to generate cash flow.On 14th January 2016, an investor group, comprised of Aneka Tambang (Persero) Tbk PT and Indonesia Asahan Aluminium PT agreed to acquire a 10.6 percent stake in Freeport Indonesia PT (Freeport Indonesia), a Jakarta-based copper and nickel ore mine operator for US$1.7 billion. 

Nickel ma deals q4 2015 q1 2016

*all deals have been included.

Regulatory updates

Table 1: List of recent regulations6 in the nickel industry


Country/Region Regulation/topic  
Madagascar New tax rules prevent nickel shipments On February 2016, the Madagascar government announced its new Advance Cargo Declaration (ACD) regulations on mining companies, which levy a US$100 fee on every shipping container. As a result of the enforcement of this new regulation, nickel miners including Sheritt International were unable to ship its spare parts and nickel carrying containers from the island’s Toamasina port.
Indonesia Indonesia to ease mining export ban from 2017 On February 2016, the Indonesian government announced plans to relax its ban on partially processed minerals exports, including nickel, copper, zinc and bauxite ore in order to boost its economy.



Table 2: Nickel deals announced in Q4 2015 and Q1 20167

Date announced Target Acquirer Status Value
of transaction
(US$ million)
08-Oct-15 Nord Resources Corp-Assets Excelsior Mining Corp Announced 8 NA
13-Oct-15 Macarthur Iron Ore Pty Ltd GIM Australia Pty Ltd Announced 4 100
28-Oct-15 Port Exploration Pty Ltd Caeneus Minerals Ltd Announced 1.6 100
06-Nov-15 Asmara Mining Share Co

Sichuan Road & Bridge Mining Investment Development Corp Ltd

Announced 78 60
26-Nov-15 Universal Coal PLC Coal of Africa Ltd Announced 89 100
14-Jan-16* Freeport Indonesia PT

Investor Group (Aneka Tambang (Persero) Tbk PT and Indonesia Asahan Aluminium PT)

Announced 1,700 11
01-Feb-16 VMS Ventures Inc Royal Nickel Corp Announced 0.5 100
08-Feb-16* Coro Mining Corp Greenstone Resources LP Announced 0.5 33
16-Feb-16 Magellan Minerals Ltd Anfield Nickel Corp Announced 10 100
01-Mar-16* Azarga Metals Ltd European Uranium Resources Ltd Announced 2.5 60
10-Mar-16* First Quantum Minerals (Kevitsa mine) Boliden AB Announced 712 NA
21-Mar-16* Haib Minerals Pty Ltd Jet Gold Corp Announced 2 30


*covers deals including both nickel and copper.


1 Philippine miners to cut nickel ore output, exports, March 2016, Business World Onine website, accessed May 2016

2 "Resources and Energy Quarterly", Bureau of Resources & Energy Economics (BREE), Australian Government, March quarter 2016, accessed April 2016

3 "Resources and Energy Quarterly", Bureau of Resources & Energy Economics (BREE), Australian Government, March quarter 2016; Profile PT Sulawesi mining investment, November 2015, Lowongankerja website; Output cuts halt nickel price fall, more mine closures needed, March 2016, Reuters website, accessed April 2016

4 "Resources and Energy Quarterly", Bureau of Resources & Energy Economics (BREE), Australian Government, March quarter 2016, accessed April 2016

5 MergerMarket and Thomson One accessed April 2016

6 Sherritt’s Madagascar unit says new tax rules prevent nickel shipments, February 2016, The Globe and mail website; Indonesia to ease mineral export ban from 2017, February 2016,
website, accessed May 2016

MergerMarket and Thomson One accessed April 2016

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