Spot Trading is Sluggish as High Nickel Prices Suppress Downstream Demand

SHANGHAI, Feb 6 (SMM) - Nickel prices continued to grow last week because of the production resumption of companies post CNY holiday. On February 2, the US Fed announced that it raised the interest rate by 25 basis points to 4.50%-4.75%, which was in line with market expectations. The news of potential ban on nickel ore exports in the Philippines has aggravated concerns about the availability of ore sources in the market. However, SMM believes that multiple factors such as the strength of government policies, high electricity costs, and rainy seasons in the country will slow the implementation of the ban. Early last week, Jinchuan Group proposed to ramp up the refined nickel output by 6,000 mt per year, and successfully increase the output by 600 mt in January. Premiums of imported pure nickel could hardly drop due to the high cost. The spot premiums of NORNICKEL nickel were higher than those of Jinchuan nickel, and traders were less willing to ship. On the demand side, the operating rates of nickel wire and nickel mesh and alloy producers were relatively high. But the demand from those companies remained weak following the pre-CNY holiday stockpiling and because of the high nickel prices post CNY holiday. The electroplating and NI-MH battery factories suspended their production before the CNY holiday amid low profit margins. According to SMM research, most electroplating companies intend to resume their operation after February 5. Orders of NI-MH battery factories are expected to improve in February, and the operating rates may increase by then. In general, high prices aroused fears among downstream companies. As of last Friday, the spot transactions were weak. In terms of nickel briquettes, the market only saw some transactions from steel mills. Purchases by nickel sulphate producers were rare as MHP supply was sufficient and nickel briquette prices stood higher than nickel sulphate prices. In summary, the suppliers were much more willing to ship, but the spot trading was reduced by the high nickel prices. It is expected that the fundamentals will offer weaker support for nickel prices.