Reuters reported that nickel prices were under pressure for much of May and still look vulnerable to further weakness as near-term demand worries dominate. Demand from the key stainless steel industry is easing for seasonal reasons but more than would normally be expected.
Mr Jim Lennon of Macquarie Bank said that "Stainless producers have announced cuts and maintenance closures in Europe and Asia. The Q3 seasonal dip looks like it's coming a bit early. Stainless steel production accounts for around two thirds of nickel demand. Stainless buyers have been holding off making purchases.”
Mr Peter Fish of steel consultancy MEPS International said that in the next couple of months people have sufficient stainless steel inventories in warehouses to hold off buying. They may not hold off the whole order book, but they will not invest in building stocks."
Mr Lennon said that the nickel market had been in supply deficit in the H1 of the year due largely to disruptions in Canada, Japan and Colombia. But he expected it to move into surplus in the H2 as those problems recede and output ramps up at new facilities.
He said that there was some potential for prices to fall around 10% to 15% in the next 2 to 3 months. The London Metal Exchange 3 months nickel price was last indicated at USD 22,113 per tonne.
Mr Will Adams analyst of Fastmarkets said that the nickel market had done a lot on the downside but still saw potential for prices to nip down to USD 20,000. On the whole, though he expected them to range between USD 22,000 and USD 23,000 per tonne in the next month or so.
Below are some of the more significant recent developments in production and prices that may continue to influence the direction of the market in 2011.
Production
May 30 - Pacific Metals Company, Japan's largest ferronickel producer, said that it expects output to plunge to 8,305 tonnes in the April-September H1 down 59% from the same period last year due to damage to its plant from the March 11 earthquake. The company expects production at its Hachinohe plant in Aomori prefecture, northern Japan to return to normal by mid June.
May 27 - BHP Billiton said a shortage of hydrogen has halted output temporarily at its Kwinana nickel refinery in Western Australia. Production at the plant was halted in March 2010 due to a hydrogen shortage and last December by a lack of nitrogen gas. Both hydrogen and nitrogen are key ingredients in the nickel refining process.
May 11 - According to the National Bureau of Statistics, China produced 75,185 tonnes of refined nickel in the first four months of the year up 30.0% from year ago levels.
Prices
Nickel prices ended May at USD 23,595 per tonne down from USD 26,850 a month earlier. The month's high of USD 27,325 was reached on May 3 and after that it was downhill throughout most of the month as worries about demand prospects dominated. The market resisted a move below USD 22,000 per tonne however and this level has remained intact in the H1 of June.
A Reuter’s poll in January showed nickel cash prices were expected to average USD 24,251 per tonne this year versus an average USD 21,811 last year. Trading bands narrowed and while prices tended to favor the lower end of the month's range the market pulled up ahead of USD 22,200. Nickel fell further to USD 22,050 its lowest since November.
