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Nickel Prices Under Pressure

By Abhishek BansalCommoditiesApr 20, 2021 05:13AM ET
www.investing.com/analysis/nickel-prices-under-pressure-200574071
Nickel Prices Under Pressure
By Abhishek Bansal   |  Apr 20, 2021 05:13AM ET
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LME nickel prices currently trading near $16,222 per mt which is sharply lower from the recent high of $20,107 registered on Feb.22 but still marginally up from the recent low of $15,670 registered on Mar. 9.

The nickel price rally was supported by rising demand from the electronic vehicle batteries sector, solid consumption from the stainless steel industry and supply chain disruption after top producer Indonesia banned nickel ore export from 2020. However, the Indonesian government has been trying to boost nickel processing in the country by offering incentives for miners who build smelters in efforts to create jobs and to increase the value-added to their mineral reserve. An additional supply of finished products from Indonesia is likely to keep Nickel prices under pressure. 

Global economic data released on Monday was mixed for industrial metal demand. Eurozone construction output for February dropped -2.1% m/m which is the biggest drop in 5 months. However, Japan March exports rose +16.1% y/y, stronger than expectations of +11.4% y/y and the largest increase in 3-1/4 years. Meanwhile, economic output in Germany contracted in the first quarter of this year due to prolonged lockdown measures and a VAT (value-added tax) increase that contributed to reduced private consumption.

Concern that the global resurgence of Covid infections will hurt economic growth and industrial metals demand is negative for nickel prices. The overall global Covid-19 caseload has topped 141.8 million, while the deaths have surged to more than 3.02 million, according to the Johns Hopkins University.

On the inventory front, LME warehouse stock has increased by 2,790 mt in the last 30 days and now stands at 262,764 mt as of Apr. 19. However, nickel inventory in SHFE has dropped by 1,701 mt and now stands at 8,159 mt as of Apr. 19. China Invisible inventory has dropped by 934,000 mt in the last 30 days and now stands at 39,41,000 as of Apr. 19 which is a nearly 19.2% drop in the last one month.  A significant drop in inventory in China is indicating strong physical demand due to recovery in economic activity.

As per the latest report from the International Nickel Study Group (INSG), the global nickel market surplus expanded to 6,200 tonnes in February from a downwardly revised surplus of 3,500 tonnes in the previous month. INSG report is indicating strong supply and weak demand.

Russian metals producer Nornickel has improved its 2021 production forecast slightly as one of its mines is resuming work ahead of schedule after flooding. Increasing production is negative for nickel prices.

LME 3M Nickel prices are likely to trade negative while below key resistance level around 50 days EMA at $16,775 per mt. It may find a strong support base around $15,902-$15,792 per mt.

Nickel Prices Under Pressure
 

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Nickel Prices Under Pressure

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Disclaimer: Mr. Abhishek Bansal is a new-age, first-generation entrepreneur, and the Founder Chairman of Abans Group, a quintessential diversified business group, providing expertise in Broking Services, Non-Banking Financial Dealings, Financial Services, Agri-Commodity Services, Warehousing, Realty & Infrastructure, Gold Dore Refinery & Manufacturing, and Trading in Metal Products, Pharmaceuticals, Software Development & Wealth Management.
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