Nickel Prices Retrace As Indonesian Supply Soars
MetalMiner | Aug 30, 2016 04:42AM ET
After a two-month rally in June and July, nickel prices are retracing in August. What caused nickel to rally and what is causing prices to fall in August?
h2 Philippines Supply Down/h2In June and July, nickel rallied as the Philippines reviewed all existing mines in order to close those that had adverse impacts on the environment. At least eight nickel mines have been shut down so far this year, cutting around 10% of the country’s capacity.
The Philippines is by far the largest nickel ore supplier to China since Indonesia imposed an export ban for unprocessed material back in 2014. Lower production is already showing up in the export numbers. For the first seven months, China imported 13.84 million metric tons from the Philippines, down 27% from the same period last year.
The current disruptions in the Philippines have no doubt tightened the market for nickel ore triggering a price rally this year . However, will this shortage in China’s nickel-pig iron industry translate into a shortage of nickel in the global market?
h2 Indonesian Refined Nickel Supply Up/h2While supply of nickel ore to China is declining, supply of refined nickel to China is rising. For the first seven months, China’s imports of ferronickel from Indonesia have surged more than four-fold to 390,700 mt. Comparing apples to apples, the nickel content of the year to date ferronickel exports equal to about 4 million mt of nickel, slightly less than the 4.13 mmt loss in the Philippines so far this year.
For this reason, we hear some analysts saying that China isn’t importing less nickel, it is just changing the form in which it imports the metal.
h2 What’s Different From 2014?/h2Back 2014, nickel prices surged as Indonesia prohibited ore exports. However, prices sold-off later on as miners in the Philippines moved into the trade. This time, it’s the other way around. Environmental restrictions are shrinking supply in the Philippines while Indonesia is making up for that loss.
Get The News You Want
While prices have fallen in August, so far the decline seems like a normal price retracement after nickel gained over 30% in June and July. Also, there are two other factors that make us think that the decline won’t be as severe as it was in 2014:
- Back in 2014, nickel prices rose independently while the rest of the industrial metal complex was falling. This time, it’s not only nickel but we also see many industrial metals rising, which bodes well for rising nickel prices.
- It’s barely been a month since the Philippines started to shut down mines and volumes may be squeezed further after the shutdowns accounting for about 15% of output.
What This Means For Metal Buyers
The supply and demand balance for the coming months will depend on how many more mines the Philippines shut down versus how much more ferronickel/refined nickel Indonesia continues to supply. So far, we believe it’s to early to call for the end of nickel’s bull run.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.