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.
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.