Nickel Trading Picks up as the Prices Fall

SHANGHAI, Feb 13 (SMM) - Nickel prices dropped first and then rose last week amid the active news and macro front. On February 3, the US Department of Labor announced that the seasonally adjusted non-farm payrolls added 517,000, which far exceeded the expectation of 185,000. This means that the current US economy is more resilient and the Fed may increase the rate hikes further in the future, which was bearish for commodity prices. On the news front, on February 9, nickel futures began to grow following a fraud that attacked Trafigura. SMM believes that the fraud may confirm that the current nickel inventory is lower than the actual value, which has intensified the market’s concerns about the tight supply of nickel and has a bullish effect on the futures prices. In terms of fundamentals, the SHFE/LME nickel price ratio rose, and spot imports began to gain profits. Some traders thus nailed the price ratio and are expected to clear customs this week. China produced 16,400 mt of refined nickel in January, down 1.5% on the month but up 37.24% on the year. The sharp YoY increase was contributed by Jinchuan’ production ramp-up and the commissioning of electrodeposited nickel production lines in China. On the demand side, when the nickel prices fell as a result of the macro sentiment early last week, downstream companies restocked some raw materials. According to SMM research, in-plant inventories of raw materials stored by alloy companies were consumed and reached a historically low level at the beginning of the week. In addition, the nickel prices declined. These factors boosted the spot trading. However, affected by news of fraud, the prices of nickel rebounded, and the transactions became slack. The mainstream traded prices of nickel briquettes were around 3,000-4,000 yuan/mt, which were still higher than nickel sulphate prices. But some stainless steel mills still had demand for briquettes. In general, downstream enterprises are negative towards high nickel prices at present. Besides, spot pure nickel in the bonded warehouses will flow into the domestic spot market this week. SMM believes that the spot supply will be relatively sufficient this week. Nickel prices are expected to trend lower.