The global nickel ore market has struggled with severe oversupply issues, significantly impacting nickel prices and related industries. Indonesian government has introduced several policies to boost domestic nickel mining and smelting, leading to rapid increases in production. However, this rapid growth has resulted in an oversupply in the market, causing a decline in nickel prices. Coupled with a slowdown in global economic growth, particularly in major nickel-consuming nations, demand for nickel has diminished. As a result, nickel prices have plummeted by approximately 40% over the past year.
In response to these challenges, BHP Group, a leading global mining company based in Australia, has announced a temporary halt to its Nickel West operations and the West Musgrave project, effective October 2024. The company intends to review its operations in these projects by February 2027.
Nickel’s role as a crucial component in battery production means that market dynamics directly affect battery manufacturing and downstream industries. BHP Group operates a nickel sulphate plant in south of Perth. With the suspension of operations, this plant will also shut down, potentially affecting major battery customers such as Panasonic, Tesla and others. The plant, a significant supplier for Tesla, had a low-carbon nickel agreement with BHP in 2021, with its first batch of crystals produced by the end of that year. The suspension could cut total nickel production by 400,000 tons, disrupting the global battery supply chain and impacting production costs and market prices for new energy vehicles and energy storage systems. However, the completion of the first electric vehicle battery plant in Indonesia might lead companies to seek lower-cost partnerships in Indonesia in the future.
BHP’s decision to suspend its nickel operations in Western Australia reflects the challenging conditions of the current nickel market. The severe oversupply of nickel ore is having a substantial impact on both companies and the market. Fitch Solutions attributes this situation to increased investment in Indonesia’s nickel industry following the 2020 export ban on nickel ore, which accelerated the localization of the industry and boosted export volumes. With Indonesia now the world’s second-largest supplier of nickel ore, addressing the decline in nickel prices due to oversupply is a significant challenge for global companies.
Overall, while nickel prices remain under pressure and the global market continues to deal with the effects of increased production from Indonesia, Fitch Solutions projects that prices will decline further from 2024 to 2028, and the oversupply situation will eventually ease. Thus, the current price decline should be viewed as a temporary issue. Companies that adopt strategic adjustments and make long-term investments are likely to navigate these challenges successfully amid global oversupply and low prices.
If you, a prospective client, have further inquiries about the topic discussed above, Schinder Law Firm is one of many corporate law firms in Indonesia that has handled numerous similar matters, with many experienced and professional corporate and civil lawyers in its arsenal, making it one of the top consulting firms in Indonesia. Feel free to contact us at info@schinderlawfirm.com for further consultation.
Author:
Dewi Susanti