1. Dollar to Euro exchange rate
2. Stainless steel global production
3. Global capacity utilization
4. China coking coal prices (impacting Chinese nickel pig iron production)
5. China GDP & PMI data
Nickel fundamentals do not tell a very good story if you are a stainless producer or service center. However, buying organizations likely feel differently about bearish metals. Nickel faces a number of headwinds that will continue to put pressure on prices.
Specifically, nickel suffers from weak global demand, excess service center inventory levels, an Indonesian export ban that failed to do what it intended to do (we’ll come to that in a moment) and increased stockpiles in China (although we do not accept the one-to-one correlation that higher inventory levels necessarily equate to lower prices and vice versa, lower inventory levels don’t necessarily equate to higher prices).
Service centers tell MetalMiner that inventory levels remain well above historical “healthy” MOH averages (about 2.4-2.6). Instead, inventory levels are up over 3.5 months, seasonally adjusted. This is a very bearish indicator. Demand has slowed for the typical summer slow-down. Service centers report transactional business is slow.
The Indonesian Export Ban
As many are aware the Indonesian government banned the export of unprocessed minerals back in January of 2014. Instead of having the desired effect of generating new investment for higher value added processing in country, exports have dried up and the government has begun tinkering with the ban to allow for some copper exports. The ban on nickel and aluminum exports remains intact but news reports suggest the ban for bauxite might be lifted which may be an indicator that the government could change its policy.
Regardless, this too is a bearish factor weighing on nickel.
Three-month nickel closed the month of June at $12,000/mt, sliding to a 6-year low. Nickel is in free-fall as shortage expectations faded. The long-term outlook remains bearish, especially while the rest of base metals keep falling. We expect to see high price volatility in the coming months.
So What Should My Industrial Buying Strategy Be?
This nickel price forecast was excerpted from our brand new Monthly Metal Buying Outlook report. For a short- and long-term buying strategy with specific price thresholds, consult the July 2015 report!