Shanghai nickel prices close to year-high amid low inventories

SHANGHAI, Jul 17 (SMM) – Shanghai nickel prices surged for five consecutive trading days to near their highest in a year as of Tuesday July 16, driven by low inventories and limited availability of deliverable cargoes, SMM believes.

Prices were also bolstered by speculative purchases on worries about potential supply shortage on Indonesia earthquakes and its planned 2022 export ban on nickel ore. SMM learned that the frequent earthquakes in Indonesia caused a limited impact on nickel pig iron (NPI) production, but temporarily suspended shipments of nickel ore from local mines. 

In the morning trading hours of Wednesday July 17, the most-liquid SHFE nickel contract held on to gains from overnight and hovered around 110,000 yuan/mt, after it climbed as much as 4%, ending at 109,460 yuan/mt on Tuesday July 16. 

Upbeat market sentiment is expected to keep nickel prices at highs in the short term, but the steady release of NPI new capacity will cap the upward room.

SMM data showed that China’s production of NPI expanded 3.44% from May to stand at 49,500 mt in Ni content in June. 

The NPI market is in a tight balance currently as demand from stainless steel producers remains robust. An SMM survey showed that domestic production of stainless steel grew 23.73% on the year in June, standing at 2.34 million mt. Production could climb to 2.5 million mt in July, SMM estimated. 

Strong ferrous metals amid domestic production curbs also triggered the latest prices rise of nickel, which mainly used in the stainless steel industry. 

China will tighten supervision and checks over the phasing out of obsolete steel capacity in the third quarter, authorities said on Tuesday July 16. The top steelmaking hub of Tangshan will also stick to its commitment to strict production curbs as its Fengrun district released fresh smog-control plan for the second half of July. 

Official data showed that domestic production of crude steel expanded 10% from a year ago to stand at 87.53 million mt, with daily crude steel output rising to a record high, indicating brisk demand for raw materials. 

As of July 15, nickel inventories across LME-approved warehouses registered 150,324 mt, almost half from May 2018, LME data showed.