(Agence Ecofin) – The nickel market is going through a period of turbulence, while Indonesia, the world’s largest producer, wants to drastically reduce its production. If this announcement is worrying, it could also offer a window of opportunity for Africa where countries like Madagascar and Botswana aim to play a leading role in the global industry.
Indonesia plans to reduce its nickel mining quotas from 272 million tonnes in 2024 to just 150 million tonnes in 2025, a potential drop of almost 45%. According to details relayed in the international press this week, this decision would be motivated by the desire to support prices after two consecutive years of decline and could lead to a reduction of more than a third in the global supply of this critical metal. For Macquarie Group analysts, cited by Bloombergthis reduction, if it materializes, would lead to an increase in nickel prices on international markets.
Price drop in 2024 and outlook for 2025
2024 was an overall bearish year for the price of nickel. In November 2024, the price of nickel even reached its lowest level in 4 years, i.e. $15,540 per tonne. This decline continued in the following weeks with the three-month nickel price at $15,415 on December 30, a decrease of 7.2% year-on-year and 28.7% from the $21,615 reached in May. . Several factors explain this downward trend, and among the most cited by analysts, we find continually increasing production among the main producers, Indonesia and China, which has created a surplus on the market. On the demand side, the growing adoption of LFP (lithium-iron-phosphate) batteries, favored for their lower cost and reduced environmental impact, calls into question the role of nickel in the supply chain of energy technologies. the energy transition. The other factor that impacted prices concerns uncertainties regarding tax incentives in the United States for electric vehicles with the return of Donald Trump to the American presidency.
In response to low prices, some major mining companies, such as BHP and Anglo American, have already suspended operations or sold assets. In Africa where several countries produce nickel, states and companies are waiting to see if Indonesian restrictions will create a favorable context for their industries. For 2025, each of these countries will likely be closely monitoring how the market develops if Indonesia goes through with its plans. While S&P Global Commodity Insights remains cautious by still predicting a surplus on the market, Wood Mackenzie analysts, cited in a note by the site Carboncredits.com, anticipate that the good news will come more from the demand for primary nickel which could increase by 10 to 12%, “almost double the expected growth in production”.
Madagascar and Botswana, between opportunities and challenges
With the Ambatovy mine, one of the largest nickel and cobalt projects in the world, Madagascar has considerable potential to become a key player in the nickel market. However, the project is going through difficulties for several years. In November 2024, Sumitomo Corporation, Ambatovy’s largest shareholder, announced a restructuring of the project’s debt and wrote down its book value to zero, after accumulating nearly $2.7 billion in losses. In a context of an expected rise in nickel prices, this restructuring could offer Ambatovy a new opportunity. Indeed, a resumption of production at full capacity would allow Madagascar to take advantage of the favorable situation on the world market and diversify its export revenues. In 2022, nickel represented 25% of the country’s total export revenues, according to the Central Bank of Madagascar.
-For its part, Botswana actively prepare its return to the nickel market. Since the closure of the Selebi and Selkirk mines in 2016, the country no longer exports nickel. However, the situation may soon change. In November 2024, Premium Resources, owner of the two mines, released an initial estimate of Selkirk’s mineral resources, reporting 108,000 tonnes of nickel and 132,000 tonnes of copper. This revival is part of a strategy to diversify the Botswana economy, historically dominated by diamonds. According to the IMF, diamonds still represent nearly 80% of the country’s exports. The government is now supporting the development of projects in other mining sectors, such as copper, manganese and nickel, to reduce this dependence and ensure more balanced growth.
Despite a promising global context, challenges remain for African nickel producers. Sumitomo’s experience at Ambatovy illustrates the technical and financial difficulties linked to the exploitation of this metal. Likewise, reviving production in Botswana will require significant investment and rigorous management of mining projects to ensure their economic viability.
Louis-Nino Kansoun
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