SHANGHAI, Oct. 9 (SMM) – Linyi’s Environmental Protection Bureau required local NPI producers to cut or halt production in late September, and Shandong Xinhai Technology, a large-size NPI producer in the region, was required to cut output by 50 per cent. The cut or halt will last 4 months, running from November 15, 2017 to March 15, 2018.
What’s the impact on nickel ore demand from the cut or halt policy in the region?
Philippine Nickel Ore Exports Hold Flat MoM in September
If the policy is implemented strictly, demand for medium-grade nickel ore will fall by about 1.80 million wet tonnes based on Ni 1.5% ore consumption in producing high-grade NPI (Ni content) to be affected by the policy, SMM estimates.
Nickel ore price is closely related with LME nickel and supply&demand dynamics in nickel ore market. The relation among them could be illustrated by the chart below. According to the chart, nickel ore price tracks in tandem with LME nickel for most of time. Moreover, when nickel ore supply is sufficient, nickel ore price is relatively weaker than LME nickel, that is, price declines are bigger than those in LME nickel or price gains are smaller than those in LME nickel. Furthermore, when ore supply is tight, nickel ore price is relatively firmer, that is, price declines are smaller than those in LME nickel or price gains were bigger than those in LME nickel. The change in ore price decline or increase is also affected by ore suppliers’ willingness in sales given low self-sufficiency rate at domestic NPI producers.
China Refined Nickel Output Falls 11.5% MoM in September
The monsoon season in major nickel ore producing regions of the Philippines is coming soon, but nickel ore supply in China is expected to be in excess of 1.38 million wet tonnes in Q4 2017, despite NPI output decline outlook in Shandong’s Linyi following the policy.
To sum up, SMM expects nickel ore price to fall slowly in October, as LME nickel is estimated to stage range-bound trading against the background of lower stainless steel output expectation in China. In November, LME nickel will be supported as the decline in NPI supply is estimated to be bigger than that in stainless steel output, and nickel ore price will get a boost from this, SMM foresees.
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