MODEST NICKEL PRICE
INCREASES ANTICIPATED FOR THE NEAR TERM - MEPS
Nickel prices are forecast to rise in the
short term despite LME stocks being at record levels, having
recently broken through the 250,000 tonne mark for the first time.
Some inventory replenishment is expected in the stainless steel
supply chain, in the early part of 2014, whilst a moderate increase
in real demand is foreseen. Moreover, history has shown that
technical trading mechanisms can result in rising nickel values when
LME stocks decrease, even when the absolute inventory level remains
The impending ban on exports of mineral ores from Indonesia may put
further upward pressure on stainless steel scrap and nickel prices.
Although many observers have speculated that the Indonesian
authorities will back away from a total ban, in favour of, for
example, increased export duties. However, recent statements from
official sources have reiterated the position that the country will
enforce its Mineral and Coal Mining Law, requiring that miners
process minerals before exporting them. That means that raw mineral
exports will be banned, as of January 13, 2014.
The Chinese stainless steelmaking industry utilises nickel pig iron
(NPI), derived from laterite ores, as its first priority for nickel
units in stainless steel production. The newest NPI plants have
further cut the cost of providing nickel to a figure, reportedly, of
around $US11,000 per tonne. This erodes the previously assumed
nickel base price of $US13,000 per tonne.
Any shortage of NPI will increase demand for higher grade nickel
sources. However, it is believed that there are extensive stores of
nickel ore in China – possibly enough to satisfy the needs of
stainless steel producers for up to a year. This would certainly
delay the effect of the Indonesian measures.
Although global crude stainless steel production is predicted to
increase by 4 percent in 2014, to nearly 38 million tonnes,
oversupply will persist, as existing excess stocks are augmented by
expanding nickel mining capacity. Furthermore, some traditional
nickel producers have postponed output cuts, so that they are in a
position to take advantage of any short term supply dip resulting
from the Indonesian ban.
MEPS forecasts that LME Cash nickel values will record moderate
rises over the coming four months, before subsiding slightly and
trading within a fairly tight band for the remainder of the year. As
a result, the average nickel price in the next 12 months is
anticipated to be similar to the 2013 figure.
Source: MEPS -
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