Russia's MMC Norilsk Nickel (Nornickel), the world's largest producer of palladium and high-grade nickel, announced last week that its full-year core earnings rose by 37pc in 2021 on surging metal prices and the sale of stockpiled palladium left over from 2020.

Nornickel's earnings before interest, tax, depreciation and amortisation (EBITDA) jumped to $10.5bn from $7.7bn in 2020. Nornickel's 2021 net profit stood at $6.97bn, a 92pc increase from the year before.

Together with higher realised metal prices, Nornickel said the 15pc year-on-year revenue increase to $17.9bn was owing to the sale of palladium from inventories gathered in 2020, which more than offset production losses caused by industrial incidents it suffered in the first half of 2021.

The nickel market recorded a 166,000t deficit in 2021, according to Nornickel, as curtailed supply of Class-1 nickel, a lower-than-expected ramp-up of Indonesian NPI projects, a robust recovery in demand in the stainless steel and battery markets, and massive restocking across the value chain tightened the market beyond expectations.

Nornickel expects the nickel market to swing to a 42,000t surplus in 2022, led by growth in low-grade nickel output, while it anticipates the high-grade nickel market to be balanced or in a mild deficit because of the twin factors of a surge in EV uptake and stronger stainless steel demand from 2021 levels. The group anticipates that the ramp-up of Indonesian nickel pig iron (NPI) capacities may fall short of expectations again on supply chain and pandemic-related issues.

Nornickel forecasts global primary nickel consumption to rise to 3.3mn t in 2022 on growing stainless steel output, particularly in Indonesia and China, and strong nickel demand in batteries, projected to rise by 30pc year on year.

Increase in supply is envisaged to outpace growth in consumption, with Nornickel anticipating Indonesian NPI supply to rise to 1.2mn t, the production of nickel compounds for the EV market to grow to 400,000t upon the launch of the NPI-to-matte conversion facilities and high-pressure acid leach (HPAL) projects, and Class 1 production to rise by 5pc.

The group is bullish about underlying fundamentals for nickel in the longer term, with consumption in batteries to grow to nearly 1mn t by 2030 to constitute 30pc of total nickel demand as a base-case scenario. As carbon neutrality goals gain impetus, subsidy-driven electrification and cost optimisation of battery cell production will lead to potentially stronger growth.