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Nickel on the London Metal Exchange fell to a fresh low this week, trading as low as $10,440 per metric ton on Tuesday.

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The metal is experiencing huge sell-offs as the Chinese stock market plunges. We can't really put all the blame on nickel since this is not the only metal falling. Weakness in China and a strong dollar keep punishing commodities and, even more stridently, industrial metals.


The monthly Stainless MMI® registered a value of 68 in July, a decrease of 6.8% from 73 in June.

Bearish Fundamentals, Too

Nickel's supply and demand fundamentals, however, agree with the bearish picture the market is painting. We see a couple of factors weighing on prices:

  • First, the Indonesian government banned unprocessed mineral exports in January. The ban on unprocessed nickel and aluminum exports still remains in place. However, after the country already relaxed restrictions on exports of copper, the Indonesian government is considering a relaxation of export restrictions on aluminum and it's possible that nickel will be the next unprocessed ore to have its ban lifted.
  • Second, most analysts were expecting that LME stockpiles would level off. However, nickel stockpiles surged in June, adding to concerns that production is outstripping consumption. Although we've pointed out before that there is not always a good correlation between stockpiles and metal prices, many people might be pointing out that the underlying demand isn't that strong.

What This Means For Metal Buyers

As nickel free-falls, prices are approaching the record low levels of 2009. Nickel could be the first base metal hit that floor. Nickel would have to fall another 17%, but with the pace we are seeing prices falling, it wouldn't be a surprise to see this happen at some point...

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The Stainless MMI® collects and weights 14 global stainless steel and raw material price points to provide a unique view into stainless steel price trends over a 30-day period. For more information on the Stainless MMI®, how it's calculated or how your company can use the index, please drop us a note at: info (at) agmetalminer (dot) com.

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The monthly Stainless MMI® registered a value of 73 in June, a decrease of 3.9% from 76 in May.


After a small price increase in April, nickel prices fell again in May. Prices are now trading near their lowest levels in six years. Meanwhile, nickel inventories jumped to a fresh highs, accentuating an overhead of supply and cutting expectations of the bulls that expected a deficit to develop.

Demand Cannot Outstrip Supply

Although stainless demand is expected to grow moderately, service centers have plenty of inventory and that is putting pressure on US mills. Moreover, a stronger dollar last month sent most base metal prices down, including nickel.

Aluminum is one metal showing similar behavior. The demand outlook for both metals was quite optimistic. That brought bulls in to support prices from falling. However, the bearish commodity market (there's a serious lack of demand) and a strong dollar made these two metals give up all their gains from 2014.

What This Means For Metal Buyers

It's not that stainless demand is weak, it's just far from being strong enough to overcome the excess of inventory, increased imports and a strong dollar. While the macro picture stays the same, expect prices to remain range-bound at best.

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Stainless steel and nickel rebounded impressively this month, gaining 5.6% from a low of 72 in April. The monthly stainless MMI® registered a value of 76.

3-month London Metal Exchange nickel rose in April, after falling as low as $12,200 per metric ton, the lowest levels since 2009. Technically, this recent price increase is nothing to be concerned about, at least yet.

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Nickel prices fell as much as 40% from October to April so a 5.6% increase this month seems just like a normal price reaction after a significant fall.

For the first time in nine months a weaker dollar and more stable oil prices are giving some short-term momentum to commodity prices. Nickel certainly benefited from this in April, as did most of the base metals we track. If weakness in the dollar continues, nickel prices could keep rising in this second quarter but momentum will likely vanish before prices are able to make a significant move.

Demand Not Helping Prices

End market demand seems to be robust in markets such automotive and residential appliance, although it's still weak in the energy market due to low oil prices. However, a moderate growth in stainless steel demand won't likely help move prices up too much this year. Service centers have excess inventory and that is putting pressure on US mills. This glut of inventory is a big contrast from last year when lead times went above the standard, causing service centers to look for alternative sources.

As my colleague Katie Benchina Olsen pointed out recently, until service centers reduce their inventory backlogs and nickel prices start to improve, service centers will not buy, regardless of price. Service centers need to focus on getting their inventories in check before they resume anything resembling regular buying patterns. ​​However, the mills are under pressure to book capacity and that could put more pressure on prices if they are not able to think longer-term.

What This Means For Metal Buyers

Nickel prices went up this month but that should not panic nickel buyers. Prices could keep rising in the second quarter as the dollar weakens but the outlook for the balance of the year remains bearish.

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Nickel has fallen to a 6-year low on the London Metal Exchange, as prices have broken a key support level.
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The monthly Stainless MMI® registered a value of 72 in April, a decrease of 7.7% from 78 in March. Stainless steel prices are falling along with their key alloying metal.

Those traders that supported the metal price from declining further have now changed their minds. This simply means that the market sentiment has changed. Selling pressure has overcome buying power and, without making any predictions, nickel is now more vulnerable to further declines.

Two factors helped to change the market sentiment:

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The monthly Stainless MMI® continued its long descent from Mount Kilimanjaro and registered a value of 78 in March, a decrease of 3.7% from 81 in February. The nickel price drop has now lasted 10 months since its meteoric early 2014 rise.

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Nickel is hovering around its lows of 2014. We believe that these lows ($13,400 per ton) are an important level to watch.

Most analysts agree that nickel's fundamentals remain positive, at least on the supply side. The Indonesian authorities haven't changed their minds and the ban on exports of nickel ore to China there hasn't changed. The flows of material between the two countries have disappeared.

A surge in nickel ore supply from the Philippines and the fact that China's nickel pig-iron producers have built up significant quantities of stocks prior to the January 2014 ban compensated for the supply decrease. Indeed, the ore ban in Indonesia led to a 37% increase in nickel mining in the Philippines last year. One Filipino nickel miner even announced an IPO. It seems as if it's just a matter of time until we see some impact on NPI production rates.

Although most analysts are focusing on the supply side, we believe that the key for the nickel price is directly related to nickel's demand expectations. Those expectations are low at this point, and this is weighing down nickel prices.

Our analysis points to the behavior of commodities and the industrial metal industry group together making up over 60% of the specific metal price. This is the reason why we are seeing many industrial metals hovering near record lows as well.

We can see the similarities between aluminum and nickel. In theory, aluminum has strong fundamentals, too, but we see that both metals have fallen near lows after a good rally in 2014.

Indonesia's export ban is there, but what happens to nickel prices from now will likely depend on the commodity market. The nickel price might be punished regardless of the supply constraints. Prices may continue to decline no matter what happens on the supply side.

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After the fallout from the Chinese documentary "Under the Dome," many nickel pig-iron producers are under pressure to clean up their act or shut down.

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Could nickel prices get a boost from the most recent closures at NPI producers in Linyi City, Shandong Province, China?

“The closures will not boost nickel price,” an analyst told CS.com.cn, citing high LME nickel inventories, tumbling nickel prices, and a strong dollar.

Supply of low-grade NPI is also sufficient, the analyst told the website.

Linyi is a major producing region of low-grade NPI in China, with output accounting for 75% of China’s total.

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Xinjiang Xinxin Mining Industry, China’s second-largest producer of nickel used in stainless steel production, told the South China Morning Post it expects its fourth quarter results will show a profit and a 300% jump in revenue.

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The improvement was due to higher nickel prices, sales volume and lower production costs in 2014, while revenue was also boosted by the commissioning of a copper project in the middle of last year, the Xinjiang-based firm said in a filing to Hong Kong’s stock exchange.

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London nickel is hovering around a 14-month low on Wednesday, as a relentless rise in exchange-held nickel stocks overshadowed expectations of a shortage of nickel ore towards the end of the year.

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China's stocks of nickel ore, used to make stainless steel, have dwindled following an export ban by Indonesia at the start of last year, raising expectations producers will have to turn to nickel instead.

LME prices jumped more than 50% early last year, but have since slumped back to trading levels in place before the ban.

"Clearly the bulls have capitulated," strategist Daniel Hynes of ANZ in Sydney told Reuters, adding that there appeared to be no sign of nickel ore being replaced with nickel in China.

LME stocks have surged by 30% in the past six months alone, hitting a string of record highs, to around 430,000 tons.

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The government of India, this weekend, proposed a hike in the peak rate of import duties on steel products from 10 to 15%. The move, if approved, will likely stem the flood of cheap imports from Russia and China.

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While this was part of recommendations made by finance minister Arun Jaitley in his budget speech, the timing of the decision will depend on the government notification after the budget is approved by Parliament so there is no immediate relief in sight for stainless steel producers who have been hit particularly hard by the cheap imports.

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Indian stainless steel manufacturers got some relief this week as the government proposed increasing import duties on Chinese and Russian importers.

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Surcharges fell in the US as well.

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