NICKEL extended a year-long slump as rising Indonesian supplies help create a glut, while other base metals declined on reduced bets that the US Federal Reserve will cut interest rates next month.

Prices of nickel on the London Metal Exchange (LME) have almost halved over the past year, prompting miners outside of Indonesia to close operations. Risk appetite for that metal and other industrial commodities fell further on Monday (Feb 5) after Fed chair Jerome Powell said policymakers will likely wait beyond March before cutting interest rates.

The nickel market has been thrown into chaos after a flood of new supply from Indonesia – the result of huge Chinese investment and major technological breakthroughs. As prices fall, mines across the world are at risk of closing, with some seeking state bailouts or going bust. BHP, for one, is now weighing up the future of its flagship Nickel West mine in Australia.

As the Indonesian supply of the key battery metal continues to crank up, the market is expected to remain in a surplus for the rest of the decade, pushing prices down further, according to BloombergNEF analyst Allan Ray Restauro. He did not expect the closure of non-Indonesian mines to have a significant immediate impact on prices, as those assets represented less than 2 per cent of global capacity so far.

Even so, the production cuts announced so far are equal to about 30 per cent of the 200,000 tonnes surplus predicted for this year, analysts at Morgan Stanley said. The bank sees as much as 253,000 tonnes of capacity at risk and says non-integrated nickel pig iron producers in China and Indonesia could soon need to reduce output as well.

“Nickel’s 45 per cent price drop in 2023 is starting to drive supply curtailments, suggesting the price is close to finding a floor,” the bank’s analysts wrote. However, they said: “A more robust demand backdrop would be needed for more meaningful price upside”.

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Nickel fell 0.6 per cent to US$16,135.00 a tonne on the LME as at 10.53 am local time. All metals declined on the bourse. BLOOMBERG