LME Nickel to Advance in February on Supply and Demand Support

SHANGHAI, Feb. 15 (SMM) - Nickel ore supply news from the Philippines stirred the nickel market recently. Global nickel price surged with Philippines' release of final mining audit results, and fell back after the country temporarily allowed mining and sales at firms on the list of closures or suspension.

It is now a monsoon season in Surigao, one major nickel ore producing region in the Philippines, with no ore shipments from the region in Q1. This, together with continuous inventory declines at China’s nickel ore ports, will support nickel ore price from raw material supply side, SMM predicts, even there is no closure news after the mining audit from the Philippines. LME nickel is expected to advance to around $11,000 per tonne in February, SMM foresees. 

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How long China’s nickel ore inventories will be used? 

SMM data show monthly ore consumption at domestic NPI producers is about 3-4 million wmt in the past two years, but in the most recent four months (from October 2016 to January 2017), the monthly ore consumption is above 4 million wmt. The ore consumption is also expected at around 4 million wmt this February, SMM estimates. 

According to SMM data, nickel ore inventories at China’s ports were around 10 million wmt as of late January, and ores available for trades were around 8.20 million wmt after excluding 1.80 million wmt of “zombie ores”, which has no mining rights after years’ losses. Nickel port inventories have dropped to a multi-year low in China, and those ores are, in theory, able to meet 2-month’s production demand in China.  

Nickel ore inventories at China’s top 21 NPI producers (rank by capacity) are sufficient for 2-month production on average, according to SMM survey. Domestic NPI producers usually build at least inventories enough for one-month production, to reduce production risks from raw material supply disruption, such as transportation problems or other issues. SMM predicts that China will import by about 2 million wmt of nickel ore (all imports are estimated to come from the Philippines) in February and March, and those imports can be used for half a month. 

After considering all these factors, ore supply for domestic NPI producers remains slightly tight. 

High profits are expected to encourage production at domestic #300 stainless steel mills in Q1 2016, SMM foresees.

SMM learns that profits at #300 stainless steel mills (8 percent Ni) narrowed in early February after prices dropped, but overall profits remained moderate. SMM survey finds that profits at domestic #300 stainless steel mills are around 10%. Domestic #300 stainless steel mills after completing regular maintenance during the 2017 Chinese New Year holiday will resume normal production, and output will stay around 1 million tonnes in February, up above 5 percent on a yearly basis. 

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