Nickel outlook – neutral short-term, positive medium-term; in spite of anticipated solid demand growth rates in 2018 we expect nickel market deficit to reduce to 15 thousand tons from 105 thousand tons in 2017 owing to ramp-up of NPI production in Indonesia and recovery of ore export volumes from Indonesia and the Philippines; battery sector remains a highly prospective, but still a relatively marginal driver of global nickel demand; we expect it to become a material consumer of nickel possibly from 2020s onwards subject to the EV penetration growth; in the medium term, we see tightening Class 1 nickel market balance, thus commanding a premium over Class 2 products and potential nickel market bifurcation.

In 2018, we anticipate economic growth in all key regions, which should be supportive of solid nickel demand. Primary nickel demand is expected to increase 6% y-o-y on the back of strong stainless steel output in China and continuing ramp-up of stainless production in Indonesia. We forecast another strong year in the demand in batteries as well as nickel alloys, with the latter being driven by expansion in aerospace and oil and gas sectors.

However, the ongoing ramp-up of NPI capacities in Indonesia (which are expected to add 76 thousand tons in 2018) and the strong outlook for the export of ore from the country as export quotas are now exceeding 30 million wet tons (over 300 thousand tons of nickel units) are likely to result in an accelerated growth of supply, thus reducing substantially the major apparent market deficit of 2017. Upside risks to our nickel market base case forecasts in 2018 are related to weather conditions, which may impede shipments of ore from the Philippines and Indonesia to China, and potential regulatory action in the Philippines, where the government may yet again adjust its policy towards the mining sector.

In the long run, we see very good prospects for the battery sector becoming the main driver of global nickel consumption. The forthcoming shift in favour of more nickel-intensive technologies (NCM and NCA) in battery cathode material alongside the growing share of electric vehicles in the global cars’ production should drive up strongly the demand for Class 1 nickel products towards 2025. By this year, we forecast that an incremental annual increase in nickel uptake from batteries could exceed 500 thousand tons (which equals almost half of the current consumption of Class 1 nickel). Until then the price recovery will be subject to the drawdown of nickel exchange inventories, which remains at 70 days of global consumption. In addition, we see major potential for further substitution of Class 1 nickel products in STS with Class 2, thus making the former available to cover any incremental demand coming from the battery and other sectors.

• [Editor:王可]