Stainless steel demand keeps nickel near nine-month peak

31 August 2017

Nickel prices retreated on Wednesday, but held near nine-month highs due to healthy demand from China’s stainless steel mills and falling supplies from the Philippines, a top ore exporter, supporting sentiment.

Benchmark nickel ended down one percent at $11,595 a tonne as a failure to break higher triggered a bout of profit-taking. The metal had peaked on Tuesday at $11,885 to register its highest price since November. Nickel prices are up more than 15 percent this year.

“Stainless steel demand in China and elsewhere has surprised on the upside and talk about nickel consumption in lithium-ion batteries has helped,” Societe Generale analyst Robin Bhar said.

“Supplies have been under stress. The Philippines exported less for various reasons, including monsoon rains, mine inspections and shutdowns. Some NPI (nickel pig iron) capacity has been shut in China because of environmental inspections.”

STAINLESS: UBS raised its stainless steel demand growth forecast for this year to 3.5 percent from 1.1 percent previously. Its estimate for 2018 is 6.2 percent. “China’s appetite for stainless steel products ... is the main reason for our upward revision,” UBS analysts said.

CHINA: The bulk of the world’s stainless steel is produced in China, which accounts for about two thirds of global nickel demand.

PHILIPPINES: Nickel ore output in the Philippines fell 24 percent in the first half as several mines stopped operations because of government sanctions and bad weather. At least eight nickel mines have had operations suspended since last year for environmental breaches.

INDONESIA: Lower supplies from the Philippines have been partly offset by Indonesia, where a ban on exports has been partially lifted. Indonesia is also exporting nickel pig iron.

STOCKS: Nickel stocks in LME warehouses, up more than 11,000 tonnes since Aug. 11, could weigh on prices. However, traders say that metal earmarked for delivery -- cancelled warrants -- at above 36 percent suggests a tighter LME market.

TECHNICALS: Upside resistance for nickel is seen at $11,942, the upper Bollinger band. A break may see a test of $12,000 and eventually the $12,145 peak hit on Nov. 28. Support is at $11,000 and below that at $10,900, near the 21-day moving average.

FUNDS: Traders say nickel’s recent price rise was also down to funds reversing short positions betting on lower prices. ALUMINIUM PREMIUM: The discount of $10 a tonne for the cash contract over the three-month contract from a premium of more than $11 on Aug. 22 suggests that large amounts of aluminium could soon come under LME warrant. DOLLAR: A higher U.S. currency, which makes dollar-denominated metals more expensive for holders of other currencies, weighed on prices of industrial metals.

PRICES: Copper fell 0.3 percent to $6,769 a tonne, aluminium slipped 0.4 percent to $2,087.5, zinc gained 0.4 percent to $3,096, lead ceded 0.4 percent to $2,370 and tin gained 1.2 percent to $20,600.