Analysis of the Recent Market for Key Metal Nickel

Analysis of the Recent Market for Key Metal Nickel

The strong rise of Indonesia's nickel industry has had a huge impact on producers in Western Australia, but it has also provided opportunities for companies such as Nickel Industries. With the advancement of high-pressure acid leaching technology, production costs in Indonesia have significantly decreased, making production costs relatively high in other parts of the world.

Despite the current pessimistic attitude towards nickel prices in the market, the management of Nickel Industries predicts that the market will rebound in the next 2 to 3 years, and the company is expected to achieve significant growth.

The rapid growth of Indonesia's nickel industry has made the nickel industry in Western Australia sluggish, and many projects that were once worth billions of dollars no longer exist.

Indonesia, with its vast nickel ore resources and government support policies, has increased its share of global nickel production from about 10% in 2016 to over 50% in 2023, and its dominant position is expected to further strengthen in the coming years.

Despite the heavy blow to Australia's nickel industry, nickel producers in Indonesia are showing a prosperous scene.

Justin Werner, Managing Director of Nickel Industries (ASX: NIC), pointed out that Indonesia has always had abundant nickel resources, but it was not until recent years that cost-effective processing technologies have emerged.

The high-pressure acid leaching technology has a history of about 50 years and has been attempted in places such as New Caledonia and Madagascar, but it has long been criticized for not being delivered on time and for high capital expenditures, "he pointed out.

The situation has changed now. These new generation high-pressure acid leaching factories can produce nickel at significantly lower costs than nickel sulfide producers

To add some perspective, the cost of high-pressure acid leaching may be between... per ton, while the cost of nickel sulfide producers in Australia and other parts of the world may be between... per ton

The price of nickel has decreased by about 25% in the past 12 months, to $16000 per ton. Given this, it is easy to understand why manufacturers other than Indonesia have withdrawn from the market.

Mr. Werner put it this way: "Indonesia's significance to nickel is like Western Australia and the Pilbara's significance to iron ore, or the Middle East's significance to oil and gas. Other parts of the world also have iron ore and oil and gas, but there is really no other place that can produce nickel on a scale and cost like Indonesia

Although the current general view of nickel is bearish, the main reason is

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Macquarie analysts predict that Nickel Industries' nickel production will increase by 40% over the next three years, potentially boosting the company's net profit from $121 million in 2023 to $621 million in 2026. This assumption is based on an average of one ton from 2024 The nickel price has moderately recovered to 2026 per ton.