Raw material supply troubles underpinned nickel prices

SHANGHAI, Feb 6 (SMM) – Nickel futures prices edged higher in morning trade on Thursday, after two consecutive days of substantial gains, as concerns grew about nickel pig iron (NPI) production in China and nickel ore supply from the Philippines amid the novel coronavirus outbreak.

Shanghai nickel has largely recovered from Monday’s plunge, with the most active contract on the Shanghai Futures Exchange for April delivery standing above the five-day moving average. The contract hit a peak for this week at 106,200 yuan/mt in early morning trade, compared to the close of 105,690 yuan/mt on January 23, the last trading day before the Lunar New Year holiday.  

On the London Metal Exchange, three-month nickel contract ended at $12,720/mt overnight, its highest close in more than a week.  

An SMM survey showed that NPI producers in Inner Mongolia, a major producing hub of such material in China, are operating at low levels, due to a shortage of raw materials and accessories as well as labour forces as the result of the recent epidemic outbreak. Some plants have shut to wait until the epidemic is over, and some plan to follow suit.

Nickel prices were also underpinned by concerns about nickel ore supply, as the major supplier—the Philippine—tightened its noose in all ports, banning the disembarkation of vessel crews while docked at any the Philippine Ports Authority (PPA)-controlled ports, in order to protect Philippine borders from further contamination with the virus. However, vessels calling at any Philippine port more than 14 days after calling at any China port, are allowed without any restrictions.

In the physical market, SMM assessed #1 refined nickel at 105,000-106,000 yuan/mt on Thursday February 6. Shanghai traders offered Russian materials at a premium of up to 100 yuan/mt over the SHFE 2003 contract, and Jinchuan materials at a premium of 800-1,200 yuan/mt.

While premiums were lower than earlier this week, downstream consumers showed little buying interest as they still could not take cargoes from warehouses in Shanghai or nearby regions. There were transactions of Jinchuan nickel done this morning, as cargoes can be shipped from Gansu.