Nickel – Waiting for deficit to arrive
Posted Monday, June 29th 2015
Nickel definitely ran ahead of the fundamentals in the first part of 2014 and is now paying the price.
The combination of a surge in exports of Philippine ore, the blending of this with Indonesian stockpiled ore - enabling NPI producers to keep operating- and a 154,000- tonne increase in LME stocks have all dampened sentiment, as has the delayed arrival of the muchanticipated supply tightness.
With Indonesian ore stockpiles in China still around 7 million tonnes, the longawaited drop in NPI production is unlikely until the second quarter of this year.
At this point LME stocks might start to be needed to balance the market. (Extract from www.fastmarkets.com)
Overall trend – After last year’s false start in which nickel ran up to $21,625 per tonne from around $13,300, prices have pulled back aggressively to a low of $14,625.
This took prices back to the upper levels of the base that was established in the second half of 2013. We would expect this base to provide strong support - the fundamentals are set to improve this year, although with more than 400,000 tonnes of nickel in LME-bonded warehouses there will be no shortage per se although the metal in warehouse will not necessarily be for sale at current price levels.
Still, there are no dominant holders of the warrants. Given the sharp rally and the slump in prices, we would imagine the investment community and consumers will be nervous about positioning themselves too early so we would not be surprised by a gradual price recovery initially that could gain momentum as confidence returns.