Nickel Comes Back! How High Will Price Reach? SMM Reports

SHANGHAI, Jul. 19 (SMM) – Nickel price has begun rallying from lows from Jul. 10, with LME nickel up from $8,800 to $9,700 per tonne, and SHFE three-month nickel up from 73,000 to nearly 80,000 yuan per tonne. 

What are driving forces behind the surge? 

SMM attributes the gain to support from market fundamentals on top of positive economic data. 

Nickel Price to Hover at Highs, SMM Foresees

Purchasing demand from domestic stainless steel mills is growing with higher profits. Margins for #200 and #300 stainless steel now average at around 10 per cent due to low inventories at mills, flow of speculative funds and end-user demand improvement. Decent profits encouraged mills, which previously ran at low rates, to step up production, and meanwhile, one high-grade NPI-stainless steel integrated plant in east China plans to increase output in July, all growing demand for nickel. The condition could be also reflected by brisk trading for nickel plate, domestic NPI and imported ferronickel in China’s domestic spot market. China’s stainless steel output is sure to grow in July on a monthly basis, and the exact increment will be the only question. 

SMM survey also finds that inventories of domestic refined nickel, NPI and ferronickel are being consumed steadily. 

SMM preliminary data show that inventories of domestic refined nickel fell to around 160,000 tonnes (including those in bonded area, SHFE and other public warehouses) in mid July, down by about 5,000 tonnes from June’s; inventories of domestic NPI were also down from 100,000 tonnes of nickel or 10,000 tonnes (Ni content) in June to current level of 50,000 tonnes or 5,000 tonnes (Ni content), being held by domestic NPI producers; inventories of imported ferronickel, about several tonnes of goods, are nearly being used up. 

China Nickel Ore Inventories Fall, SMM Reports

Will the surge have further to run? 

"High margins at stainless steel mills and a weak dollar will add to market impetus, so nickel price will keep rising for the foreseeable future, but any rising room will be not that big,” SMM nickel analyst says. 

It is a traditionally off-demand season in stainless steel market from June to August, so recent rapid gains in stainless steel market may raise worries over consuming future demand in advance.

Meanwhile, potential increase in NPI supply after nickel rises and inflows of Russian nickel from opening of profitable import window will add to market raw material supply. The decline in inventories of domestic nickel plate will likely slow down as a result. 

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