SHFE Nickel to Remain Bullish amid Extended Destocking

SHANGHAI, Feb 17 (SMM) - LME nickel inventory has declined since January and SMM believes that the destocking will continue.

Nickel sulphate prices rebounded as the supply tightened after loss-making producers lowered their output in the past two months. The profits of nickel sulphate producers improved amid rising prices. Given the severe shortages of raw materials, SMM believes that any further improvement of nickel sulphate profit will be limited because nickel salt plants will resume their production after the profits recover to a certain level, which will intensify raw material shortfalls and boost raw material prices.

The nickel sulphate - precursor integrated factories have to increase their proportion of in-house dissolution of nickel briquette so as to meet their growing demand for nickel sulphate. Currently, nickel briquette remains the main raw material of nickel sulphate. Nickel briquette inventory will continue to decline until high-grade nickel matte can fill in the supply gap of raw materials. Since February, high-grade nickel matte has been used as a raw material for the trial production of nickel sulphate, but the output will be relatively low this month. The output is expected to gradually increase in March and increase significantly in June, but the monthly supply may be less than 10,000 mt in nickel content.

Despite the tight domestic supply, the import window remained closed in light of the unfavourable SHFE/LME nickel price ratio due to low nickel inventory overseas.  However, the import window based on the spot prices was open as the domestic spot premiums were at a high level.

Stainless steel mills will gradually resume their production at the end of February, which will boost the demand for NPI. With the ramp-up of high-grade nickel matte capacity at Tsingshan Group, it is expected that the increase in NPI supply will be limited. NPI prices will perform strongly in February-March under the support of cost and recovering demand.