Supply gap to extend rise in nickel prices in Q1

SHANGHAI, Feb 2 (SMM) – The nickel market will continue to see a supply shortage after the week-long Chinese New Year holiday, as demand from downstream stainless steel plants grows after CNY maintenance. This is likely to extend the increase in nickel prices in the first quarter, SMM expects.  

Those stainless steel mostly held low inventories before the holiday, SMM learned. 

A closed import arbitrage window capped the increase of imported nickel supplies as of February 2. Traders also purchased limited volumes of Norilsk nickel in long-term contracts for the first quarter, an SMM survey found. Jinchuan Group plans to maintain stable production for the first quarter of 2019. 

The commissioning of new domestic cpaacity eased current tight supplies of nickel pig iron (NPI), but significant supply growth will not happen until the second quarter, SMM assessed based on progress of projects.

A large NPI plant in the east China commissioned all four new production lines of submerged-arc furnaces last week, and two started to produce NPI products this week. Each furnace has a capacity of 650 mt in nickel content per month. 

While the domestic production is faster than market forecasts, the commissioning of Indonesia’s new capacity was slower than expected.  

Bolstered by fundamentals, the SHFE nickel 1905 contract is likely to test pressure above at 102,500-103,000 yuan/mt after holiday, SMM expects. 

Higher prices of crude oil and the ferrous complex, together with falling inventories of nickel, pulled the futures prices close to 100,000 yuan/mt as of February 1, from 86,000 yuan/mt from the beginning of 2019.