Andy Home: Growing stock overhang dampens hopes for a recovery in nickel.
Nickel's early year rally is a collective wager that Indonesia's multiyear production surge will finally abate, allowing for the?market rebalance to occur after four consecutive years oversupply.
A growing mountain of excess metal in the London Metal Exchange (LME) or Shanghai Futures Exchange warehouses reminds us that this is likely to be a long-term process.
The combined exchange inventory is 468.600 metric tonnes, which is the largest stock overhang since 2015. This is equivalent to approximately six weeks of global usage.
Growth has slowed down as LME registered stocks have plateaued. The rise in Shanghai inventories has also been accelerating. This suggests that the refined nickel surplus will now migrate eastwards.
Production Hits in the West
LME Nickel stocks, including non-warranty inventory, increased for nine consecutive months between June of last year and the end of March. They peaked just below 400,000 metric tons.
Since then, they have dropped by 20,000 tons. Metal is still arriving in large clips at LME warehouses, but warrant cancellations and loading rates have increased in recent weeks. This indicates a greater demand for metal on the physical market.
Two unexpected production hits are being felt by the Western supply chain.
Ambatovy Mine in Madagascar is suspended due to damage caused by a cyclone since February.
The mine will produce 28,000 tons finished nickel products by 2024. It is currently being taken over by Jason Kluk who was the former head of Nickel Trading at Glencore.
Sherritt International’s Fort Saskatchewan refinery could run out of feed just as Ambatovy returns at the end this month.
After the latest round of U.S. Sanctions on Cuba, the Canadian producer has suspended its direct participation in the joint venture.
The company said last month that it only expected to have enough raw materials to last until the middle of June.
Sherritt had expected to produce between 26,000 and 28,000. However, the outlook has become very uncertain. Sherritt has lost its nickel business as a result of the sanctions. The company just signed a 'term sheet' to sell a majority stake to Gillon Capital.
SURPLUS MOVES IN CHINA
The Chinese inventories are rapidly increasing, while the nickel stocks in the West show signs of exhaustion.
Shanghai's stock exchange has almost doubled in the first half of the year, and is now at 87,671 tonnes, the highest since 2017. The increase has been continuous, with no seasonal effect from the New Year holiday period.
Many more may be in government warehouses.
Imports of refined metal from China were a surprise last year, and have been strong so far this season.
According to the World Bureau of Metal Statistics which collects official customs data, the country imported 231,000 tonnes of nickel in 2025. This was the highest total in four years.
Chinese nickel producers have also exported 171,000 tons, mostly to LME storage facilities in Asia.
It is not logical to have a two-way market unless the imports include purchases made by government stockpile managers.
Macquarie analysts believe governments bought around 150,000 tonnes of nickel in the past year to build up reserves of what is considered by most to be an essential mineral. The bank anticipates more strategic purchases this year.
China's stockpiling of nickel is not explicitly mentioned, but it has been a long-standing strategy to take advantage of low prices and buy more metal.
Slow Rebalancing
The import boom in China has continued into this year. The volume of refined nickel imported into China increased by 56% on an annual basis to 94,000 tonnes in the period January-April, while exports dropped to only 9,400 tons.
Shanghai's prices are lower than those in London, despite China's expanded smelter capacities, which run off Indonesian raw material.
Price gap should be a new incentive for exports, but that hasn't happened yet.
The West doesn't need more metal despite the turmoil in Madagascar and Canada.
Indonesian production is likely to fall due to a combination of government mining regulations and a lack of sulfur in?processing. However, this will take some time before it becomes apparent on the refined metal segment of the?market.
Nickel's rebalancing act could take a while.
Andy Home is a columnist at. This column is great! Check out Open Interest, your new essential source for global financial commentary. Follow ROI on LinkedIn and X. Listen to the Morning Bid podcast daily on Apple, Spotify or the app. Subscribe to the Morning Bid podcast and hear journalists discussing the latest news in finance and markets seven days a weeks.
(source: Reuters)
