Nickel stockpiles tracked by the London Metal Exchange, which have surged 71 percent this year, reached an all-time high of 239,958 metric tons yesterday. This is a market in chronic oversupply resulting from systemic over-production.
Nickel jumped to a nine-week high in London as investors purchased the metal to close out bets on mounting concern that ore exports will be halted next year from Indonesia, the world’s largest producer.
Nickel producers face a global surplus of 140 000 t this year due to disappointing demand and new production projects, a monthly bulletin from the International Nickel Study Group (INSG) forecast on Thursday.
The nickel surplus is a 40% increase from 2012 and INSG predicts that the excess supply will continue into next year, albeit at a lesser amount of 120 000 t. It added that 2014 figures could also be hit by the introduction of Indonesia‘s export ban on nickel ore.
Whereas Deutsche Bank indicated that the nickel market outlook would be better in the first quarter, global nickel market was in surplus by 74,200 tonnes in the first six months of the year, a monthly bulletin from the Lisbon-based International Nickel Study Group (INSG) showed on Tuesday.
Deutsche Bank expects nickel prices to climb from an average of $15,000 per tonne ($6.80 per pound) in the current quarter to $16,500 per tonne ($7.48 per pound) in the fourth quarter and $18,000 per tonne ($8.16 per pound) in the first quarter of 2014 before retreating to $17,000 per tonne ($7.71 per pound) in the second quarter of next year.
China announced Monday that its gross domestic product growth slowed to 7.5% in the three months ended in June. Its economic growth is still strong, compared with much of the world. But recent single-digit expansion rates are a notable comedown from a 14.2% peak in 2007.
Unlike so often in the past, though, the Chinese leadership shows little inclination to act. Indeed, the mood in Beijing is studiedly sanguine. Not only did the national statistics bureau describe yesterday’s figures as “within the reasonable range for the year”. Finance Minister Lou Jiwei even hinted, last week, that growth could drop well below 7 per cent over the coming months (although his remarks were later airbrushed into line with the official 7.5 per cent target by the state news agency).
The biggest losers from China’s rebalancing are likely to be the major commodity-producing emerging markets, most of which lie in Latin America, the Middle East and parts of Africa, but China’s slowdown will impact on different commodity groups in different ways.
Nickel prices fell to a four-year low, in the latest fallout from slowing economic growth in China, the metal’s biggest user. Nickel prices are bearing the brunt of a steep decline in metals markets this year.
Nickel futures fell as low as $13,205 a metric ton Tuesday on the London Metal Exchange, its lowest price since May 2009, and ended the day down 0.8%, at $13,325. Prices have dropped 22% since the start of the year.
A nickel glut has forced down the price by nearly about 50 percent since 2011, according to a recent Reuters report.
This is the case with Koniambo in New Caledonia which will start commercial production at the beginning of January, or the refinery project between Taganito Mitsui & Co and Sumitomo Metal Mining in the Philippines, despite a Japanese nickel market with an excess of 15,000 tons over three quarters.
Nickel fell 12 percent this year on prospects for the biggest surplus since 2009. Morgan Stanley now predicts the glut will peak in 2012 and Barclays says prices should rally toward the end of the year on strengthening demand from stainless-steel makers, the biggest consumers.
After slumping more than any other industrial metal, analysts and traders say the worst may be over for nickel as restrictions on shipments from Indonesia, the biggest producer, diminish a worldwide glut.
On the London Metal Exchange, copper for delivery in three months rose 6.1 percent to close at $8,145 a metric ton ($3.69 a pound) at 6:32 p.m. This week, the commodity has jumped 14 percent, poised for the biggest increase since Bloomberg data starts in April 1986.
Copper futures for December delivery advanced 5.8 percent to $3.692 a pound on the Comex in New York. This month, the price has surged 17 percent, heading for the largest gain since March 2009.