SMM Monthly Report: LME Nickel to Test Downward $11,500 per Tonne during Late November

SHANGHAI, Nov.15 (SMM)－Last night nickel price slumped, testing downward $11,700 per tonne, breaking 20-day moving average. This drop in November accords with SMM anticipation. With pressure of tightened money supply at year-end, fundamentals of nickel keeps weak.

The greatest uncertainty of November lies in the size of winter cuts by NPI producers in Shandong’s Linyi. Market is quite concerned with whether three NPI producers in Linyi, who together account for almost 15% China’s total primary nickel supply and 25% of China’s NPI supply, will strictly follow local government’s requirement of cutting capacity by 50%.

Taiyuan government of Shanxi asked local steel plants to reduce capacity by 50%, but did not order Shanxi Taigang Stainless Steel, which meets environmental protection requirements, to cut output massively. Similarly, Linyi government may not take a one-size-fits-all approach as well, upstream and downstream producers contacted by SMM expect.  

Firstly, Different Forecasts for Output Cuts at Three NPI Producers in Linyi

Source: SMM
Notes: 1. Output cuts will take effect from November 15.
2. Forecasted output cuts = 9,500 mt in Ni content (combined normal monthly output at three producers)*50% (government required cuts)* percentage of government required cuts

SMM assigns the highest possibility to optimistic forecast. Will the lost production be compensated by newly-added supply? The answer is yes, SMM believes. 1. Supply from Indonesia will grow. Indonesia-based NPI projects of Delong Nickel and Macrolink Group have entered normal operations since October, having shipped 16,000 mt of high-grade NPI or 1,760 mt in Ni content, to China. 2. Newly commissioned NPI projects in China in September will also help fill in the gap. For example, one RKEF NPI project in Hebei, which has reached full capacity, is expected to add 147 mt (Ni content) of NPI in November.    

Secondly, China Stainless Steel Output to Fall Back from Highs in November

Zhangjiagang Pohang Stainless Steel conducted regular maintenance in November, while JISCO Stainless Steel entered maintenance because of poor orders. These two producers had lost a combined 70,000 mt of production as of November 10, including 47,500 mt of #300 stainless steel and 22,500 mt of #400 stainless steel, which resulted in a 3,800 mt drop in nickel consumption. 

Some small and medium stainless steel mills, such as Inner Mongolia Shangtai Industrial, are expected to reduce #300 stainless steel output slightly along with dwindling consumption.

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