Nickel Market to Come under Pressure from Waning Cost Support and Soft Demand in April, SMM Predicts

SHANGHAI, Apr. 11 (SMM) – Nickel market returns to be subject to market fundamentals after the commodity market digested the news in early April that China will build new Xiongan New Area in Hebei. 

In April, nickel market will come under pressure from less cost support and weak demand, SMM foresees. In mid-late April, SMM expects LME nickel to trade at $9,600-10,000 per tonne, and 80,000-85,000 yuan per tonne for SHFE three-month nickel, with reasons as below. 

Why Nickel Market Dive in Afternoon Business? SMM Reports

First, price support from nickel ore is expected to weaken for the rest of April. 

According to SMM data, China's nickel ore inventories at ports have been falling. SMM survey finds that inventories of nickel ore at China's major ports were about 7.80 million tonnes by the end of March, and those ores were only 2.9-month (the value is theoretical one, and only for nickel ore supply&demand study) sufficient for production at domestic high-grade NPI producers, down to a new record low, a sign that nickel ore supply was below demand. Amid the supply shortages, prices of Ni 1.5% ore held firm. As of the first ten days of April, CIF benchmark prices for Ni 1.5% stayed between $45-48 per tonne in China. 

However, SMM predicts that Ni 1.5% ore prices will weaken for the rest of April, but price declines will be small due to two factors. First, ore shipments are expected from Surigao, the Philippines, one of major ore supplying regions, after the monsoon season. Second, Indonesia is also expected to resume exports soon after its new policy. Both will grow ore supply expectations. In April, approximately 50 ships carrying nickel ore are estimated to be loading in April in the Philippines.  

With nickel ore prices retreating, low-end NPI production costs in China are estimated to fall further from $10,800-11,000 per tonne. 

Second, China's NPI output will be falling in April, but output from new capacities in Indonesia is expected to offset the loss. 
SMM learns that Tsingshan is expected to put online two of the four 330,000-KVA furnaces in its stage 2 of phase 3 project in early-mid April. Assuming that the two furnaces, with combined monthly capacities totaling 1,200 tonnes, are running at 40 percent of utilization rates (trial run at its initial stage), output from the new two units is expected to reach 480 tonnes (Ni content), which will offset China's NPI output decline. 

Third, profits at domestic stainless steel mills were falling in late March, and cold-rolled stainless steel prices remain under downward pressures, boding ill for nickel prices. 

Inventories of cold-rolled stainless steel products were high in Wuxi and Foshan in late March, hitting a recent-year's high. In April, de-stocking will be a major task in China's stainless steel market. 

SMM survey of major small, medium and large domestic stainless steel mills in China finds that those mills held high inventories of finished goods, but downstream demand showed no signs of improving, weighing on the market. Mills' margins are also expected to be narrowed further, also boding ill for nickel prices. But, it should note the consumption increment after stainless steel prices fall. 

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