The Acquisition of Brazilian Nickel by Minmetals Reveals the Current Nickel Market

On February 18, 2025, Minmetals Resources Co., Ltd. announced that it had reached an equity acquisition agreement with Anglo American to acquire 100% of its Brazil Nickel for a consideration of no more than US$500 million, which attracted market attention. Behind this equity acquisition, it actually reflects the structural changes in the global nickel market.

Brazil Nickel

First, let's take a look at Brazil Nickel. Brazil Nickel currently has two operating projects (Barro Alto and Codemin) and two development projects (Jacaré and MSB).

Among them, the products produced by Barro Alto and Codemin are water-quenched nickel. In recent years, the global water-quenched nickel production has declined year by year. In 2024, the water-quenched nickel production in the New Caledonia region was affected by cost and social factors, and the production dropped significantly. The Dominican Republic and Myanmar regions also experienced different degrees of reduction and suspension of production due to social factors. This has almost eliminated high-quality water-quenched nickel in the Chinese market.

At present, the mainstream water-quenched nickel in the market is mostly S32, South Korea, Anglo American Resources and Antham resources. The shortage of supply has caused the overall price of water-quenched nickel to be high in 2024. As the main material for primary stainless steel smelting in Europe, the shortage of water-quenched nickel has forced the price of water-quenched nickel to rise, and to a certain extent restricted the growth of stainless steel production in Europe. This situation improved in the second half of 2024, mainly due to the gradual resumption of production of water-quenched nickel in Vale and the import of NPI from Indonesia as a smelting raw material by some European stainless steel companies.

Industrial structure

Next, we will focus on the industry, and the overcapacity problem of the nickel industry will not be elaborated here. From a structural point of view, we see that the global primary nickel balance has changed from a large surplus of NPI in 23 to a trend in which the NPI surplus has narrowed significantly in 24, but the surplus of pure nickel has expanded significantly.

For 2025, we believe that the surplus structure of the nickel industry has also changed. In terms of NPI, there are two main reasons for the shift of NPI to tight balance in 2024. One is the continuous increase in China's 300 series stainless steel production, and the other is the slow progress of Indonesia's RKAB audit, which has hindered NPI production.

For 2025, we believe that nickel iron will shift from a tight balance to a small surplus, mainly because the slow progress of stainless steel production capacity has led to a slowdown in the growth rate of downstream stainless steel production.

Of course, we have repeatedly emphasized the restrictive effect of Indonesia's policies on nickel iron. Even if the final nickel iron production is not significantly affected, the disturbance on the policy side may also be reflected on the cost side, which will provide bottom support for nickel iron prices in 2025. In terms of refined nickel, the surplus pattern continues and has a trend of further increase. At present, domestic and foreign inventories continue to accumulate, and the overall performance of refined nickel will be significantly suppressed.

Of course, the compression of industrial profits will inevitably face the withdrawal of high marginal production capacity. The announcement of a production cut in Australia's refined nickel at the end of 2024 shows the crowding-out effect of low-cost production capacity in Indonesia and China on high marginal production capacity.

As for nickel sulfate, the overall industry may maintain a small surplus or even balance, but this does not mean that the profits of the nickel sulfate industry will rebound significantly. The main reason is still the weak performance of ternary demand and the high proportion of self-use, which has led to the gradual shift of nickel sulfate to production based on sales or even capacity clearance. As for FENI, the protagonist of this acquisition, the global FENI production may still have some room for decline in 2025, and the overall supply will continue to remain low, which provides some support for FENI prices, but the upward space is still suppressed, mainly because the demand side faces the squeeze of NPI and pure nickel.

Tianjin Port's inventory has increased

To sum up, we believe that although the overall price of the nickel industry is under pressure under the oversupply pattern, structural problems will also create some small and unique varieties. It is expected that the price of FENI will be relatively strong in 2025, but the price will also be under pressure.

In terms of nickel prices, the expansion of oversupply will inevitably compress the price operation space, and it will take time for prices to recover. The main reason is that it takes time for high marginal production capacity to withdraw.

Cost pricing for nickel sulfate continues, and overall industry profits are unlikely to pick up. Pay attention to the peak season of new energy to drive nickel sulfate prices. In the short term, the current nickel price operation space continues to narrow, and the bottom mine support is relatively strong. Pay attention to the rainy season in Indonesia. The fundamentals continue to be in excess, and the overall price performance is weak under the continuous increase in inventory. Pay attention to the guidance of macroeconomics and Indonesian policies.