SHANGHAI, Jan. 30 (SMM) – Premiums for bonded nickel in China has surged recently, up from $65 per tonne in early December to $135 per tonne in mid January.
What factors are real drivers behind the surge in the premiums?
Markets generally interpret it as an early warning signal of a shortage in China’s nickel market.
SMM, however, attributes the rise in premiums to growing demand against falling supply, and high import profitability.
Chinese stainless steel producers shifted to increase the purchase of refined nickel as NPI, a cheaper substitute for refined nickel, lost appeal after the arrival of monsoon in the Philippines from October disrupted ore supply.
The improvement in demand, when highlighted by limited supply in China’s bonded areas, gave a strong boost to premiums in imported nickel.
Inbound shipments of nickel to China fell for third consecutive month since August 2014 after the Qingdao’s metal financing fraud, significantly reducing nickel bonded inventories in China. Imports, however, began improving since November.
Another major factor behind soaring premiums is the favorable price ratio for nickel imports, SMM says.
During the period from December 2014 to mid January 2015, LME nickel tumbled from $17,200 per tonne to $13,945 per tonne, down $2,500 per tonne, while China’s spot nickel lost 11,000 yuan or $1,800 per tonne, encouraging import trades.
Whether current conditions in China’s nickel market will continue remains to be seen due to inventories held by NPI producers and supply from Jinchuan Group. There is low possibility that China will see a nickel shortfall in the short-term run, SMM foresees.
