An uninterrupted rally in nickel forward price on the LME for five consecutive months was broken in September with prices falling from 10-month high on poor demand and improving supply situation from major producing nations following easing of lockdown restrictions. LME 3-month forward contracts made a monthly low of $14,127.50 a ton from a high of $15,812.50 a ton, registering a fall of 11 per cent, while MCX nickel futures fell to a low of Rs1,040 per kg from a high of Rs1,157.50 per kg, declining by 10 per cent. The International Nickel Study Group has reported that the global nickel market surplus narrowed to 8,900 tonnes in July from an upwardly revised 14,700 tonnes the previous month.
Chinese manufacturing and non-manufacturing PMI came at 51.5 vs. 51 and 55.9 vs. 55.2 for September. This indicates that Chinese economy has been on recovery path from the Covid-19 infection. However, the global growth in other countries has been hit badly as the increasing number of Covid cases impacted the demand for nickel in many countries. The US second quarter GDP plunged to their lowest level of -31.4% YoY for the second quarter. Russia’s Norilsk Nickel had estimated the environmental cost of a huge fuel spill in the Arctic in May is 21.4 billion roubles ($273 million). The spill released 21,000 tonnes of diesel into rivers and subsoil near the city of Norilsk in Siberia. Greenpeace has compared the incident to the 1989 Exxon Valdez oil spill off Alaska and Russian President Vladimir Putin voiced fury over the leak in a television address in June. The Russian environment regulator filed a lawsuit against a power business owned by Norilsk Nickel (Nornickel) to claim 148 billion roubles ($1.88 billion) for the damage.
Indonesia’s nickel smelting park PT Indonesia Weda Bay Industrial Park is expecting to complete the building of 4 nickel processing plants by 2021 which would double its capacity. The current capacity is 110,000 tonnes of nickel content per year and it will double next year. Indonesia, which was the world’s biggest nickel ore exporter before its ban, seeks to create a full nickel supply chain at home from extracting laterite to produce electric vehicles (EVs) batteries from nickel chemicals, to eventually build EVs.
It is estimated that the impact of the Covid-19 will continue until development of vaccine and most of the countries are requiring more stimulus package to come on to the track of recovery. Further, the global market is eager to know the result of US Presidential election which is taking place on 3rd November 2020. Since the global growth is still cause of concern and assuming that China had stocked enough nickel for its immediate consumption, the nickel prices are expected to be capped in October month.
The writer is head (commodity & currency research) at Karvy Comtrade Ltd