Limited upward room seen in LME nickel prices

SHANGHAI, Mar 22 (SMM) – As LME inventories of nickel is likely to grow, we see limited upward room for prices of LME nickel even as the US dollar weakens. Investors are more likely to take long positions on copper or zinc that saw larger drops.

LME nickel inventory rose 0.9% to 325,800 mt, and cancelled warrants dipped 7.1% on Wednesday March 21. This indicated that the decline in LME inventory since December 2017 may have stopped. 

SMM retains a relatively bearish outlook on the Chinese market though sluggish downstream demand for stainless steel has weighed on nickel prices. This has led to import losses for nickel, which lost about 3,000 yuan/mt since the start of 2018. 

Import losses are likely to narrow. Unlike concerns of a surge in supply driven by exports from Philippines, only a small part of the growth will be channelled to nickel pig iron (NPI) in April due to limited smelting capacity for NPI. SMM expects that domestic output of nickel in April will increase by 4,000-5,000 mt and account for less than 5% of imported and primary nickel output in China.

Downstream stainless steel plants did not restock significantly after Chinese New Year. SMM expects demand to rebound in the near future. 

Output of #300 stainless steel will resume in mid-April. SMM does not expect a significant drop in prices as demand recovers in early April when environmental restrictions are eased. 

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