Nickel Demand Picks Up amid Tight Supply

SHANGHAI, Mar 27 (SMM) - Under the positive macroeconomic boost, the most-traded SHFE lead contract continued to rise sharply.

In the spot markte, the average spot price of SMM 1# refined nickel was 187,550 yuan/mt yesterday, up 2.99% from last Friday. According to SMM, on March 27, Jinchuan nickel were quoted at 6,500-6,700 yuan/mt, with an average price of 6,600 yuan/mt, down 1,100 yuan/mt from the previous trading day. NORNICKEL nickel was quoted at premiums of 2,500-2,800 yuan/mt, with an average of 2,650 yuan/mt, down 200 yuan/mt from a day ago. Premiums continued to fall amid the end of the month.

On the supply side, China’s refined nickel output stood at 17,300 mt in February, up 5.49% month-on-month and 33.9% year-on-year. Refined nickel output is estimated at 17,500 mt in March, up 1.16% MoM and 38.89% YoY. The domestic refined nickel output in March is expected to increase only slightly compared with that in February as most new production lines have been fully put into production. Many companies still have expansion plans in the second quarter, and thus China's refined nickel output is expected to hit a new high in the second quarter. Many Chinese enterprises have ramped up the electrowinning nickel output since 2023, suppressing the imported pure nickel demand. Besides, domestic companies shipped their goods to overseas markets amid the export profits. Although the demand for pure nickel picked up, the long-term import losses weighed on the domestic supply.

News of stainless steel mills’ production cut and suspension were negative to NPI prices. 

In terms of imports, since mid-March, spot imports of refined nickel suffered losses, but then gradually narrowed.
 

In terms of inventory, as of March 24, nickel stocks in some regions dropped by 400 mt. LME nickel stocks increases by nearly 700 mt compared with the previous day.

The demand still did not boom in the peak season as expected. Pure nickel orders placed by alloy companies were lower than expected, but the consumption by military alloy sector stood stable. Therefore, the overall pure nickel demand from the alloy sector still exists.

To sum up, at present, the demand for pure nickel has not yet picked up, and the supply side is still tight. On the macro front, the Fed raised interest rates by 25 basis points as expected and hinted that the interest rate hike may be coming to an end, which is good for nickel prices. In the short term, nickel prices are currently under strong support.

Institutional Review

Nickel supply in Surplus in Medium Term

Most-traded SHFE 2304 nickel contracts closed at 182,880 yuan/mt, a weekly increase of 3.26%. In February, domestic refined nickel output increased 12.3% month-on-month to 16,280 mt. The shortage of pure nickel has eased significantly.  The losses of nickel sulphate produced by nickel briquette has been significantly reduced. If the prices of nickel continues to fall, the production of nickel sulphate produced by nickel briquette will generate profits. Nickel prices rebounded slightly last Friday under the macro boost. However, in the medium term, as the output of new projects of refined nickel was released, the supply of refined nickel was in surplus, and thus the nickel prices will continue to move downwards.