Nickel-Downstream Demand Recovery Time

SHANGHAI, Mar. 2 (SMM) -- What are major concerns for market players in nickel industry, with the approaching of imminent NPC (National People’s Congress) and CPPCC (Chinese People's Political Consultative Conference). Based on result of an SMM survey, it is found that when downstream demand will recover is the major concern for market players in nickel industry.

According to SMM sources, 50% enterprises show their concerns over downstream demand recovery. Since transactions of prices of stainless steel are restricted by Chinese government’s regulation on real estate sector, sharp decline in auto sales growth, and sluggish demand from Europe and the US, it is expected that downstream demand will not recover significantly in March and April.

44% enterprises pay more attention to nickel ore supply in 2012. As China is highly depend on overseas nickel ore, raw material supply has become major restriction for nickel refineries and processors. China will face devastating risk if Indonesia ban exports of metal ore in 2012, and the final decision of such policy will be released by Indonesia government in May 2012. If the export ban is implemented ahead of schedule, tight supply of nickel ore will increase risks for Chinese enterprises.

Around 30% market players believe that liquidity crunch will be the largest challenge confronting the industry. Since tight monetary policy will continue to be implemented, it will be harder for enterprises to get credit. Meanwhile, poor sales and tight cash flow pressure exert great pressure for enterprises, especially nickel traders and downstream stainless steel mills, to maintain operation.

Huang Hongjun from Jinrui Futures is interest in when SHFE will launch nickel futures market, and he believes that nickel futures market will be a good platform for hedging and reducing risks.