The growth in nickel supply and the slowdown in demand from steel mills put pressure on metal prices, which are likely to come under additional pressure this year when the deficit disappears.
Reasons for weaker demand from the stainless steel sector, which accounts for 70 percent of global nickel consumption, estimated at 2.4 million tonnes this year, include a surplus of stainless steel by manufacturers in early 2019.
Also of great importance is the trade dispute between the United States and China, the two largest economies in the world, and its potential to undermine growth and demand.
Nickel prices on the London Metal Exchange for $ 11,800 per ton have fallen by 25% in the past 12 months.
“The market will be largely balanced this year - there is not a huge shortage to help prices, and a trade war hangs over the market. We are looking for an average of about $ 12,300 this year, ”said Wood Mackenzie analyst Andrew Mitchell.
LME nickel prices averaged over $ 13,000 per ton in 2018.
“The demand for stainless steel is not particularly high,” said Mitchell. "China introduced anti-dumping duties on imports of stainless steel, while Indonesian manufacturers are looking for other markets."
China is the world's largest producer of stainless steel.
In March, China introduced temporary anti-dumping measures for stainless steel products from Indonesia, the European Union, Japan and South Korea.
Analysts expect that stainless steel production in China will fall in the coming months, as the plants are overstocked and prices are falling, while supplies of nickel and iron are growing rapidly.
“This year, NPI production in China and Indonesia will grow by more than 20% to more than 900,000 tons,” said Jim Lennon, managing director of Red Door Research.
“Worldwide, NPI production will grow by about 200,000 tons. We believe that the deficit this year will be about 50,000 tons versus 150,000 tons last year. ”
Shvidko zrostayuchі deliveries nikelyu і upovіlnnya popit from the side of steel factories negatively poznachayutsya tsіnі
Deficit usually means using stocks that have been falling for more than two years. Stocks in LME approved warehouses are 164,000 tons, compared to about 380,000 tons in November 2017.
Nickel reserves in warehouses controlled by the Shanghai Futures Exchange amount to about 9,000 tons, which is one fifth of the level in January 2018.
“Part of this metal is deposited on a warrant (not in exchange depots). Stocks do not show an absolutely accurate picture, ”said the nickel trader. "Physical market awards tell a more realistic story."
The premiums for nickel in the physical market, paid above the LME base price, in China since early May have fallen to $ 235 per ton, and in Europe - about $ 225 per ton since April.
In the longer term, prices will have to grow in order to stimulate new projects and capacities to meet the growing demand in the electric vehicle battery sector, which is expected to grow next year.
“New applications, especially batteries for electric vehicles that require high-purity nickel, are changing the face of the market,” says Roskill analyst Thomas Hon-Sparbort. “Capacity building needs higher prices.”
