A price boost in May proved to be short-lived with rising nickel inventories and concerns about demand from China’s struggling property sector. The manufacturing landscape remains challenging.
Having traded as high as US$ 21 750 per tonne on 21 May, LME nickel futures were back down around US$ 17 000 by late June. The jump in nickel prices in May was attributed to several causes, including political unrest in New Caledonia with a declared state of emergency and nickel mine closures.
AP reports New Caledonia holds between 20-30% of the world’s nickel reserves and the nickel industry generates up to 90% of the archipelago’s exports. The ramp-up in copper prices in May was also cited as a supportive factor across the base metals complex.
In turn, the June price correction coincided with reports of global nickel supply surpluses and rising exchange inventories. Nickel stocks in LME warehouses have recently increased to more than 90 000 tonnes, up from around 38 000 tonnes one year ago.
The rise in stocks is partially a result of the LME’s push to expand the range of acceptable nickel brands, particularly for Chinese and Indonesian metal.
WATERSHED MOMENT
Most recently, the LME approved the delivery of Indonesian refined nickel brand ‘DX-zwdx’ containing a minimum of 99.8% pure nickel. Reuters called the new brand’s inclusion on the LME good delivery list ‘a watershed moment’ for the global industry.
‘Five years ago, Indonesia produced just 600 000 tonnes of nickel and shipped most of it as unprocessed ore to China, where it was alloyed into stainless steel,’ the agency commented. ‘Last year the country mined 2.03 million tonnes of contained metal, accounting for over half the world’s production.’
Concerns about nickel supply outpacing demand have also weighed on market sentiment lately, with the International Nickel Study Group reporting a global refined nickel market surplus of 22 600 tonnes during the first four months of 2024.
PRICE VOLATILITY
The recent weakness in nickel pricing has contributed to softness across the product supply chain, including for nickel pig iron and stainless steel. As of late June, stainless steel prices at the Shanghai Futures Exchange were down 4% as compared to the end of May.
Chinese stainless steel prices have also been impacted by the on-going weakness in the Chinese property sector despite efforts by policymakers to prop up the sector.
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