LME Nickel continued its January trend of trading on a positive note during the first week of February in the absence of demand from China. Though prices closed at a high of $13,235 during the Chinese Lunar New Year week, they returned to almost the same levels when the Chinese markets resumed work after the holidays.
Prices later touched a low of $12,195 per tonne in mid February, but couldn’t sustain the level and picked up pace by the end of the month to $13035 per tonne largely due to the weakness in the US dollar as a result of Q4 earnings, US GDP and uncertainty about trade talks.
At the SHFE front, prices consistently rose in February and ended the month at 102600 Yuan against the previous month’s close of 96760 Yuan, indicating an increased demand for the metal.
China’s imports of ferronickel rose for a third straight month in January to 154,095 tonnes, the highest since May 2017, according to data from Chinese Customs.
On the other hand, China produced 26.71 million tonnes of stainless steel in 2018, up 933,100 tonnes or 3.62 per cent from 2017. Output of #300 was 12.82 million tonnes, up 100,000 tonnes or 0.78 per cent, versus #400 at 5.47 million tonnes, up 399,000 tonnes or 7.30 per cent, and #200 at 8.26 million tonnes, up 375,300 tonnes or 4.54 per cent, all from 2017 indicating an increased need for the metal which supported the price.
Reports from International Nickel Study Group (INSG) stated that the Nickel market had a surplus in calendar year 2018 with production exceeding apparent demand by 27 kt. In 2017, the calculated deficit was 41.3 kt. Refined production in January to December 2018 totalled 2,272 kt and demand was 2,245 kt. Mine production during January to December was 2,388 kt, 411 kt above the comparable 2017 total. China produced 12,100 tonnes of refined nickel in January, up 1.44 per cent from a year earlier.
During the month Onca Puma of Brazil, which last year produced 25,000 tonnes of ferronickel, was part of a battle with environmental authorities. China’s stainless steel imports declined 41.78 per cent from a year earlier to stand at 134,000 tonnes in January. Exports fell 11.1 per cent to 319,500 tonnes, as reported by China’s Customs. This brought net exports to 185,400 tonnes, up 43 per cent year on year. On a month-on-month basis, imports of stainless steel expanded 35.67 per cent, bolstered by increase in imports of sheet/plate coils, tubes/pipes and strips. A total of 98,800 tonnes of stainless steel sheet/plate coils imports entered the nation last month, soaring 79.49 per cent from December, but declining 27.5 per cent from January 2018. Exports of stainless steel rose 14.01 per cent from December, with exports of sheet/plate coils up 12.71 per cent to 208,500 tonnes.
Production and sales of new energy vehicles (NEVs) across China is likely to exceed 1.5 million units in 2019, as per Dong Dajian, deputy head of the information and software services department. This indicates a price support for the metal in 2019. But the rise shall be capped by the usage of lithium, which is considered an alternative for Nickel.
The author is a research analyst at Karvy Comtrade Limited.