Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

The official three-month LME nickel contract fell 8.5pc to $16,191/mt on March 4, the biggest intraday fall since 2016. Despite the dip, the outlook for nickel remains positive opined commodity market experts interviewed by Davis Index.


Several factors led to the fall of nickel prices including Tsinghan Holding Group’s deal with two Chinese battery makers, Norilsk Nickel’s production cuts. Some reports suggested that there is limited room for nickel prices following Tsingshan’s deal. 


Ravindra Rao, VP- Head Commodity Research at Kotak Securities said going forward, following last week’s sharp plunge, nickel prices are expected to consolidate in the narrower range of $15,800- 17,500/mt in the near term, even as bias remains negative. If prices breach the key support of $15,800/mt then a further decline towards $14,900/mt or $14,500/mt is possible.


Surging demand from the stainless and battery demand amid enormous stimulus package rolled out by major central banks is expected to underpin nickel prices in the future, emphasised Yash Sawant, Research Associate, Angel Broking. Nickel’s stellar bull run, fueled by worries over the shortage of battery-grade metal, seems to have hit a few obstacles on its way. Booming demand from the electric vehicle sector had kept Nickel prices elevated. China’s Tsingshan Holding Group vowing to supply 100,000mt of nickel matte to Huayou Cobalt and CNGR Advanced Material triggered a significant sell-off in nickel in the past week. The major supply pact eased worries over the shortage of the intermediate product used for batteries and turned the tables around for LME nickel, he added.


On the macro front, prices have been pressurized by strength in the US Dollar and demand uncertainty from top consumer China tracking last month’s weaker-than-expected factory activity data. Meanwhile, on the fundamental front, the major factor that has weighed on the prices is easing worries over supply shortage of battery-grade nickel after Chinese firm Tsingshan announced that it had signed deals to deliver nickel matte to two Chinese battery materials suppliers, notes Rao. He further clarifies that one of the major factors that have lifted nickel prices higher recently is expectations of battery-grade nickel shortage, however, Tsingshan’s announcement help lay rest to these worries.


Apart from easing supply concerns, prices have also come under pressure amid rising stocks at LME even as those at SHFE continued to decline. Nickel stocks at LME have been trending higher for the past few sessions and at 260,376mt hover near July 2018 highs, notes Rao. 


The three-month LME nickel’s downtrend began on March 2. By March 4, LME nickel was down by 13pc or $2,444/mt to $16,191/mt. In a week, prices have plunged by 17pc or $3,423/mt by March 4.

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