When German miners first discovered nickel in the fifteenth century, they called it Kupfernickel, or “Old Nick’s Copper”, and it has had a history of devilish behaviour ever since, most recently nearly killing off the 147-year-old London Metal Exchange (LME) in 2022.
But nickel is a key metallic enabler of the green energy transition thanks to its use in electric vehicle batteries and low-emissions power generation such as wind and geothermal. Demand will nearly double between now and 2050 as ever more electric vehicles are deployed, according to the International Energy Agency’s Global Critical Minerals Outlook 2024.
After the price blow-out in 2022 nickel fell steadily over the course of 2023 to the point that many higher-cost operators were forced to mothball their mines. Global production has become ever more concentrated in just a handful of countries, first and foremost Indonesia, posing a headache for Western governments, as Breakingviews columnist Anthony Currie examines here.
However, the market has been in recovery mode since February. The London Metal Exchange nickel price is currently trading just above $20,000 per metric ton, up 21% on the start of the year. Indonesia has been slow issuing new mine permits, forcing processors in the world’s largest producer to buy record amounts of ore from the Philippines, the world’s second largest producer. Meanwhile, production in the world’s third largest producer, New Caledonia, has been severely disrupted by civil unrest.
Hard-pressed Western producers may welcome the price recovery but are still faced with Indonesia’s relentless build-out of nickel production capacity. President Joko Widodo has pursued a dream of leveraging the country’s vast nickel resources into an electric vehicle hub. His successor Prabowo Subianto has promised to do the same.
Indonesia has just added five new nickel processing parks to its list of strategic projects and the London Metal Exchange has approved its first Indonesian brand of refined nickel. This, as I look at here, may be good news for Indonesia and the LME but not necessarily for the rest of the world’s producers.
