- El Nino disrupts Indonesian smelter operations
- Supply concerns support near-term nickel prices
LME nickel prices have strengthened amid renewed supply-side concerns from Indonesia, with futures closing at $16,540/t on 22 September, up $275/t d-o-d. Nickel is currently hovering around $16,600/t, reflecting increased market attention to potential supply disruptions.
El Nino-linked drought conditions in Indonesia have disrupted operations at smelters in the Morowali Industrial Park, reportedly reducing nickel pig iron (NPI) output by an estimated 100,000 t. Lower water availability has constrained smelter operations, raising concerns over near-term nickel supply and providing upward momentum to nickel prices.
The supply-side concerns have emerged despite a stronger US dollar, which typically weighs on dollar-denominated commodities. At the same time, LME-monitored nickel inventories increased to 278,628 t, up 3.8% m-o-m, indicating that elevated stock levels continue to provide a counterbalance to the supply disruption.
For the stainless steel sector, firmer nickel prices could keep 300-series raw-material costs elevated and provide support to stainless steel pricing. However, subdued downstream demand and cautious buying could limit producers’ ability to fully pass higher input costs through to finished steel prices.
Going forward, nickel price direction is likely to remain closely linked to the duration of Indonesia’s production curbs, the impact of El Niño-related weather conditions, inventory movements and downstream demand. If supply disruptions persist, they could provide further near-term support to nickel prices, while high inventories and weak demand may continue to limit sustained upside.
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