SRB’s Latest Nickel Reserve Purchases Favor Short-Term Prices, Indonesia Nickel Ore Export Benchmark Prices Down Further

 

Xstrata will close its nearby Cosmos mine in September due to sluggish nickel prices and a strong Australian dollar. Xstrata announced in early May to stop mining at its Sinclair nickel mine in mid May as the mine reached the end of its expected life. Stockpiled ore will continue to be processed into the third quarter of the year.  

 

Indonesia Cuts June Nickel Ore Export Benchmark Prices  

The Indonesian nickel ore export benchmark prices in June continued to fall, down for a fourth consecutive month. 

 

Limited Positive Effect from SRB’s Latest Nickel Reserve Purchases 

According to foreign media reports, the State Reserve Bureau (SRB) will purchase an additional 30,000 mt in nickel reserves, bringing total SRB nickel reserves purchases during 2013 to 60,000 mt.  

 

According to SMM data, nickel stocks in bonded areas, as well as Zhongchu Development Stocks, are now about 70,000 mt, down from a peak of about 100,000 mt in early 2013. The SRB established nickel reserves of 30,000 mt beginning in late 2012, around, with the latest purchases of 30,000 mt expected to be made from 2Q to 4Q 2013, so any big positive impact will not be felt over such a long period.

 

Russian nickel and domestic nickel supply should both taken into account by the SRB, and in fact, market rumors say the SRB will make a one-off purchase of 60,000 mt of imported nickel. SMM does not believe such a plan is cost-effective since prices for imported nickel were RMB 109,436/mt, based on the closing price of USD 15,151/mt on June 3rd. When including customs clearances, towing charges and other fees, prices for imported nickel will be higher than domestic goods. As of June 3rd, prices for Jinchuan nickel were around RMB 106,500/mt. 

 

As of May 31, the lowest LME nickel price so far this year is USD 14,561/mt, down 17.7% from prices in early 2013, the worst performer among all base metals, and hit the lowest since September 28, 2008. The global nickel market is in severe supply surpluses, and weak fundamentals are blamed for sluggish nickel prices.