Nickel Pirces Gained Strong Support at 14,000 Yuan/mt, SS contract Supported by Production Cuts

SHANGHAI, Sep 27 (SMM) - The market was less bullish over the stainless steel prices despite the further production reduction last week. Many funds that are bullish over stainless steel and bearish over nickel left the market, which pushed up the nickel prices from a low level. The nickel prices need some stimulus factors to hit a new high.

First, the pure nickel inventory needs to drop further. The current inventory of nickel plate is low, and the shipments of Russian nickel may decline in the fourth quarter, which may lead to a lower import volume of the nickel plate from the previous quarter. In the domestic market, Ji’en has no plan to resume production, so the supply of nickel plate remains tight. The recent overseas quotations for the nickel plate was scarce, which also indicated the shortage of nickel plate supply.

If the pure nickel inventory falls, the demand recovery after the production restrictions of the stainless steel come to an end will boost the nickel prices. In addition, the nickel sulphate output is high, and its demand for the pure nickel remains at historical high. Nickel futures are expected to hover at high levels, and the prices are in the upward trend in the long term. SHFE nickel prices are expected to fluctuate between 141,000-148,000 yuan/mt, and LME nickel prices are expected to move between $18,800-19,600/mt.

The SS contract stood at high levels with the expectation of production cuts. The SS 2110 contract hit a new high at 22,425 yuan/mt last Thursday. However, the commodity prices fell across the board on Friday, and the SS contract fell by about 5%. The price decline was mainly due to the decreased long positions. The longs left the market with profits to avoid risks before the National Day holiday.

At the same time, the production curtailment was gradually implemented, and the expectations of the production cuts in October weakened. The bullish sentiment in the market was digested.

The stainless steel prices stood high, while the downstream consumption was weak, so the longs also left the market with the concerns about the later market consumption. However, the production of stainless steel is still restricted, which will support the prices. The SS 2111 contract is expected to remain volatile between 19,200-22,000 yuan/mt.