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Nickel Prices May Be Pressured in the Short Term Despite Supply Tightness

iconMay 17, 2022 14:22
Source:SMM
It is expected that the supply of pure nickel in May will remain tight. However, weak demand caused by the pandemic will prevent SHFE nickel from going up. As of May 11, import losses expanded further to about 15,000 yuan/mt. To sum up, the pure nickel market is expected to maintain weak supply and demand in May.

SHANGHAI, May 17 (SMM) - The supply of pure nickel remained tight in April. Despite high SHFE nickel prices in April, the import window remained closed as LME nickel did not decline significantly. Although the domestic nickel plate output increased slightly, the overall supply remained tight as China relied on imports for pure nickel. In the spot market, alloy, battery and other downstream manufacturers restocked as needed in the face of high nickel prices in April, and trades improved when nickel prices pulled back at the end of the month. However, the pandemic had a great impact on the manufacturing industry, thus the demand for pure nickel continued to weaken. Nickel briquette was still in short supply and traded at premiums over nickel sulphate. Transactions in the spot nickel briquette market virtually stagnated due to poor demand for alloy.

It is expected that the supply of pure nickel in May will remain tight. However, weak demand caused by the pandemic will prevent SHFE nickel from going up.  As of May 11, import losses expanded further to about 15,000 yuan/mt. To sum up, the pure nickel market is expected to maintain weak supply and demand in May.

LME nickel mostly fluctuated between $31,900-34,000/mt in April. SHFE nickel moved at highs under the support of tighter supply. At the end of April, under the influence of macro factors such as the US Fed's interest rate hike and decision to scale back its balance sheet, both domestic and overseas nickel prices fell. Despite the downward corrections of LME nickel, trading activity did not improve significantly. The current nickel prices are still high. The outbreak of the pandemic in China has caused production reductions in the downstream sectors, such as nickel sulphate, battery, and alloy electroplating, which may send nickel prices back to normal levels. LME nickel fell below $30,000/mt in early May. In the short term, macro factors will still suppress the momemtum of nickel prices. Although the supply of pure nickel remains tight, the weak demand caused by the pandemic will put downward pressure on nickel prices in the short term.

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