Commerzbank Commodities Radar October 2022

Source: Bloomberg data

The nickel market also faces further headwinds in the short term due to economic developments – especially in China, the world’s largest consumer of metal. In spring, the International Nickel Study Group (INSG) was still forecasting a supply deficit for this year, not least due to an increase in demand. Now, however, INSG has reported that in the first half of the year, the nickel market showed an excess supply of almost 31,000 tons. This time last year, there was a supply deficit of 125,500 tons. Weaker demand from China is likely to be one major reason for the trend reversal. At the same time, Indonesia, which has the largest nickel reserves after Australia, has been increasing production. However, the Indonesian government plans to introduce an export tax on nickel pig iron (NPI) and ferronickel, in order to support the domestic production of batteries for electric cars. This would tighten the supply of NPI and ferronickel on the global market. In the short term, it is the combination of economic worries with a view to China and strong supply in the nickel market that is likely to weigh on the price. For the year ahead, we see potential for higher nickel prices as the global recovery gathers pace.

The price of copper has been supported by a shortage in supply. According to the International Copper Study Group (ICSG), the global supply deficit was seasonally adjusted to 175,000 tons in the first seven months this year.. Both supply and demand for refined copper increased during the first six months of the year. However, there are several indications that both trends will slow down in the short term. Some of the largest copper producers have already reduced their output forecasts for this year. At the same time, there is also significant risk on the demand side, which should outweigh the looming cut in production. In July, the supply deficit of 30 thousand tons was already significantly smaller than in June; seasonally adjusted, the market was evenly balanced. We are therefore expecting the copper price to trend downwards in the short term. As with aluminium and nickel, next year – at the latest – we are expecting support for the copper price from an ongoing global economic recovery.