Nickel is set to fall into a bear market on the back of still strong global supplies, despite Indonesia’s January export ban on the metal, and China’s economic weakness. Nickel in London fell 2.5 percent today and is down 12 percent for the quarter.
Nickel for delivery in three months dropped to as low as $16,600 a metric ton on the London Metal Exchange and was at $16,690 at 10:41am in Tokyo. If prices settle below $16,800, or 20 percent down from the closing high of $21,000 on May 13, the metal will slip into a bear market.
What difference a month make! One month ago the consensus was that Nickel would see a dramatic price increase in 2015. Now, even though Indonesia, the top nickel exporter in the world, has put severe restrictions on exports, global supply remains strong, keeping the price of nickel down. “After overreacting to Indonesia’s ban, the market is removing the speculative froth on prices as there’s been more supplies of the refined metal and demand in China is slowing,” said Tetsu Emori, a fund manager at Astmax Asset Management Inc. in Tokyo. “Nickel prices will not go up until the market sees an actual shortage in ore supplies.”
The outlook for nickel has dimmed as the Philippines ramps up its nickel ore exports to China, boosting stockpiles at stainless steel makers which had been expected to run out in the first half of next year, after Indonesia banned ore exports in January.
Indonesia enacted its export ban to spur investment in the metals-processing industry, betting that the initial loss of mining jobs from the curbs would be offset by the production and export of more valuable commodities. The Philippines is heading down a similar path with at least three lawmakers proposing export restrictions. Philippine Congressman Francisco Matugas last week filed a bill seeking to ban shipments of unprocessed iron, nickel, chromite and manganese ores starting Jan. 1, 2021.
“If you look at the nickel stockpiles, those have been rocketing to much higher levels,” Mike Dragosits, a senior commodity strategist at TD Securities in Toronto, said in a telephone interview. “Supply is becoming less of a worry, especially as demand is being ratcheted back, particularly because of China’s economic weakness.”
Hefty supplies of the stainless steel ingredient have been piling up in LME-approved warehouses, suggesting limited demand for nickel. As of Friday, a record 353,340 metric tons of nickel were stored with the LME, up 35% since the start of the year, according to data from CQG.