Nickel price forecast amid lingering supply glut concerns

Nickel prices have come under intense strain as concerns about the electric vehicle market and rising supplies remain. The closely-watched Dow Jones Commodity Index Nickel price crashed to $490, the lowest level since September last year. Other metals used in the EV industry like lithium and copper have also retreated.

Robust nickel supplies

Like other products, lithium price action depends on supply and demand. In the past few years, demand for lithium and nickel has been rising as the volume of electric vehicles (EV) jump. According to the IEA, the volume of EV sales in 2023 is expected to rise by 35% to over 14 million. China, Europe, and the United States are the leading markets for these products.

EVs consume vast amount of nickel and lithium since they are powered by batteries. As such, we can conclude that nickel demand is there.

On the other hand, supply is substantially rising. A recent study showed that nickel will see a supply glut of 239k tons this year, the largest in over a decade. It will also be a bigger glut than the 105k tons that we saw in 2022. 

Most of this nickel is coming from Indonesia, the biggest producer in the world. It is followed by the Philippines, Russia, New Caledonia, and Australia among others.

There are also concerns that demand for nickel will grow at a slower pace this year. For one, some of the biggest EV companies in the world are seeing weak demand this year. Tesla has made several price cuts, which is a sign that demand is wavering.

The same is true for Chinese EV companies like Xpeng, Nio, and BYD. In this report, I noted that Xpeng’s revenue, profits, and deliveries crashed hard in the first quarter.

Dow Jones Commodities Nickel Index forecast

The Dow Jones Commodities Nickel Index is an index that tracks nickel futures. It crashed below the important support level at $502.43, the lowest level in March. Nickel has moved below the 25-day and 50-day moving averages while the Relative Strength Index (RSI) is hovering near the oversold level. It has moved below the ichimoku cloud.

Therefore, the outlook of nickel will continue falling as sellers target the next key support at $400. A move above the key resistance at $510 will invalidate the bearish view.