Nickel prices globally are likely to top $30,000 a tonne by June, driven by escalating demand from the stainless steel industry amid tight supply, analysts said. The three-month nickel contract on London Metal Exchange (LME) is currently trading at $25,999 a tonne, down $650 from previous close.
“Though the current trend is bearish, the outlook is bullish on strong fundamentals and recovery in global economies,” said Riti Singh, an analyst with Ventura Commodities.
Over the past few sessions, global nickel prices have witnessed immense selling pressure following fraud charges on Goldman Sachs by the US Securities and Exchange Commission.
“The current declining trend is short-lived. The (Goldman Sachs) news has compelled investors to move to safer assets like dollar, in turn resulting in outflows from the metal market, triggering a bearish tone,” said a city-based analyst.
Since the beginning of this calendar year, global nickel prices have surged nearly 34 per cent. The grey non-ferrous metal is mainly used in the making of stainless steel. “LME nickel is expected to find support at $23,500 a tonne and face resistance at $30,520 a tonne until June,” said Gautam K, an analyst with Kochi-based JRG Wealth Management.
Production disruption and operational delays at various mines is expected to create a shortfall of nickel amid increasing demand from the stainless steel industry in Europe and US, industry officials said.
“Recovery in global economies has pushed stainless steel facilities to full capacities, leading to increase in demand for the non-ferrous metal but there isn’t enough metal available as mines continue to face operational issues,” said a city-based nickel importer.
The world’s largest miner BHP Billiton has said it will not resume operations at its Nickel West Leinster mine in Western Australia following an accident there last week.
Vale Inco, the world’s second-largest nickel producer, is running its Sudbury smelter at 50 per cent capacity since January amid a workers’ strike that commenced in July after wage contract talks failed.
Vale’s Sudbury operations — consisting of six mines, a mill, a smelter, and a refinery — are among the largest in the world.
Also, with Vale’s Caledonia operations facing delays in implementation of new technology, production of the metal from this mine is affected, analysts said.
On the other hand, LME nickel inventories that have plunged from near a decade high of over 166,000 tonnes in February to current levels of 158,000 tonnes, indicate robust global demand, they said.
Though domestic nickel demand is seen strong during the review period, the likely up-trend in local prices is expected to be only due to firmness in the benchmark LME, traders and importers said.
“Increase in domestic nickel demand seldom has any impact on its (local) prices. India being a net importer of nickel, the metal price trend will continue to be governed by the global market,” said Surendra Mardia, president of the Bombay Metal Exchange.
India is expected to import nearly 1,300 tonnes during May-June against 900 tonnes last year, industry officials said. “Local nickel demand is expected to rise 15-20 per cent in the next two months because of increased demand from the steel sector and this is likely to push up imports,” said Nitin Jain, owner of J Poonamchand and Sons, a leading importer of nickel.
Currently, domestic nickel price is around Rs 1,168 a kg. “We expect nickel prices to move between Rs 1,050 and Rs 1,340 until June,” said Gautam K.