Where Did That Nickel Surge Come From?

What is nickel doing at $10,600/metric ton? With nickel stocks climbing to over 68,000 metric tons on the Reuters ,  and with stainless demand  still on the slide,  all of the nickel production cuts (and many a marginal producer have costs which now  exceed the price of nickel), can’t bring the market back into balance. Fortis Bank in a recent report expected that even with some 400,000 tons of production cut backs, the market will still be in surplus to the tune of 100,000 tons in 2009. So the recent price hike looks all the more perverse and one must wonder who is behind it.

Goldman Sachs is forecasting prices in the region of $8000/mt by the end of the first quarter, $8750/mt by mid year and a further firming to $9700/mt by the end of 2009 as cutbacks begin to have some impact. With such an oversupply position, our money is on the Goldman Sachs predictions. Stainless demand will be driven by construction, automotive and capital investment in the oil, gas and chemicals industry, none of which are likely to come storming back and even the most bullish proponents are only seeing growth return in 2010. So if you are a stainless consumer do not be panicked into covering far forward now, there is every chance we will see significantly lower prices again early next year.

–Stuart Burns