UNITED STATES December 02 2013 6:30 PM
NEW YORK (Scrap Register): Nickel prices are forecast to rise in the short term despite LME stocks being at record levels, having recently broken through the 250,000 tonne mark for the first time, said MEPS International in a research note.
According to MEPS, some inventory replenishment is expected in the stainless steel supply chain, in the early part of 2014, whilst a moderate increase in real demand is foreseen. Moreover, history has shown that technical trading mechanisms can result in rising nickel values when LME stocks decrease, even when the absolute inventory level remains high.
The impending ban on exports of mineral ores from Indonesia may put further upward pressure on stainless steel scrap and nickel prices. Although many observers have speculated that the Indonesian authorities will back away from a total ban, in favour of, for example, increased export duties. However, recent statements from official sources have reiterated the position that the country will enforce its Mineral and Coal Mining Law, requiring that miners process minerals before exporting them. That means that raw mineral exports will be banned, as of January 13, 2014.
The Chinese stainless steelmaking industry utilises nickel pig iron (NPI), derived from laterite ores, as its first priority for nickel units in stainless steel production. The newest NPI plants have further cut the cost of providing nickel to a figure, reportedly, of around $US11,000 per tonne. This erodes the previously assumed nickel base price of $US13,000 per tonne.
Any shortage of NPI will increase demand for higher grade nickel sources. However, it is believed that there are extensive stores of nickel ore in China – possibly enough to satisfy the needs of stainless steel producers for up to a year. This would certainly delay the effect of the Indonesian measures.
Although global crude stainless steel production is predicted to increase by 4 percent in 2014, to nearly 38 million tonnes, oversupply will persist, as existing excess stocks are augmented by expanding nickel mining capacity. Furthermore, some traditional nickel producers have postponed output cuts, so that they are in a position to take advantage of any short term supply dip resulting from the Indonesian ban.
MEPS forecasts that LME Cash nickel values will record moderate rises over the coming four months, before subsiding slightly and trading within a fairly tight band for the remainder of the year. As a result, the average nickel price in the next 12 months is anticipated to be similar to the 2013 figure.