Even as nickel prices surged in April, markets will be closely watching the developments in Brazil, Russia and Cuba to know if the prices will further gain momentum.
In Brazil, Vale S.A, the world’s largest producer of nickel, may have reported a finished output of 288,000 tonnes in April, but is struggling to find a new partner to continue its operations at its mine in New Caledonia. Vale has been struggling to establish its presence in the Nickel segment where the prices are yet to pick up due to oversupply.
In Russia, Nornickel, one of the world's top producers, manufactured around 217,000 tonnes of the metal in April, but wriggled under the fear of US sanctions.
Meanwhile, Cuba has forecast its production of nickel plus cobalt sulphide to expand by 50000 tonnes in 2018.
All these factors will impact prices of the metal in the coming months.
In April, prices of nickel factored in the impact of recent action on aluminum manufacturer Rusal and the significant impact on the supply chain. Prices at LME reached a three year high of $16687.5 per tonne whereas at MCX the prices attained the highest stance of Rs 1,093 per kg. Just as the fear of sanctions gripped the market, technical break out above $14000 brought in huge number of speculative buyers as is evident in the massive volumes generated. Chinese speculators too witnessed the highest number of Nickel contracts at 2.693 million. In response, Shanghai Futures exchange quickly increased intraday margins dispersing the speculative traders. Meanwhile, at London’s Metals Exchange, the move was looked upon as hedging against shorts in the options market.
Meanwhile, stocks at LME warehouses had declined around 4 per cent on a monthly basis, suggesting a slowdown in demand. In Nickel, inventories are significant for price trend as whenever the inventories reach a subdued level, prices shoot up. In April, while inventories declined, speculative buying pushed prices higher. Prices later came down as buyers booked profits.
In a report, the International Study Group forecast global Nickel demand to touch 2.34 million tonnes in 2018 from 2.19 million in 2017. At the same time, global Nickel output is expected to surge to 2.23 million tonnes in 2018 against 2.08 million tonnes in 2017. In the first-quarter, consolidated nickel production rose 1 by per cent year-on-year to 54,063 tonnes. As per fundamentals, nickel supply is driven by two major demand components — to feed stainless steel sector and higher purity metal for making lithium batteries and alloys.
The author is a fundamental analyst at Karvy Comtrade Limited