Nickel Prices Face Bearish Production Forecasts7 Feb 2023 20:36
https://oilprice.com/Latest-Energy-News/World-News/Nickel-Prices-Face-Bearish-Production-Forecasts.html
The Stainless Monthly Metals Index (MMI) rose 14.58% from December to January as nickel prices retreated.
Nickel prices continued to rally throughout December. But by January, prices began to show minor pullbacks that could become the beginning of a short-term sideways trend. Until prices break the new range, the market direction will remain unclear. Market volatility, however, remains high. This stems mainly from the lower overall volume in the LME exchange and leaves significant risk in the market.
Licenses at Low Levels
Import licenses remain at very low levels. As a result, there could be allocations at the domestic mills when inventory overhang resolves. Still, imports will take several months to catch up with demand. The first two weeks of January had brisk order intake at the service center level. Mills also reported that order intake was strong. Meanwhile, the alloy surcharge will increase in February, which should spur on shipments.
Global Nickel Output Could Jump 20%
A few months ago, brokers reportedly balked as Xiang Guangda looked to add to his short positions. Xiang Guangda is the founder of Tsingshan Holding Group and the man responsible for the March squeeze that broke the LME’s nickel contract. Now, emerging reports are detailing how the global nickel market could be due for a considerable uptick in production with Tsinghsan at the head.
According to a recent Bloomberg report, Tsingshan is negotiating with struggling Chinese copper producers about a potential material switch. Clearly, Tsingshan hopes to capitalize on the current high price premiums for refined nickel. Should others adopt a similar strategy, this would allow China to roughly double its year-over-year production. As a result, we could see total global output rise by around 20%.
Future Direction of Nickel Prices
Of course, there is no guarantee the output shift will happen at all or to that extent. Analysts already expect nickel production to rise due to increased efforts in Indonesia. This alone would support a projected global surplus for years to come, and nickel prices would react accordingly. Meanwhile, copper prices are now on the rise. And while the market forecasts a surplus in 2023, rising copper demand will pressure that in the long term.
There is no denying that Tsingshan is a major market player. Moreover, last year’s attempts to add to short positions seem to add some credence to these new reports. Of course, any sharp increase in supply would likely weigh significantly on nickel prices. Many will recall that while other base metals saw sharp retracements last year, low liquidity limited nickel’s downside price movement. Since bottoming out in mid-July, prices have returned to levels above their pre-squeeze highs. This leaves the market ripe for a correction, especially if 2023 brings lower stainless demand.
Sign In
Follow the stocks
