Nickel rallies amid Chinese stainless steel recovery

Nickel, like most commodities in 2020 has been heavily impacted by the COVID-19 pandemic and subsequent lockdown measures. According to Roskill, a decline in global economic performance resulted in a significant drop in consumption caused by a weakening of stainless steel demand as well as lower consumption from nickel alloys and plating sectors.

Despite this, Chinese data suggests stainless steel production has recovered strongly over recent months. 

On the supply side, despite COVID-19 disruptions to operations globally and a drop in Chinese nickel pig iron (NPI) production, a fall in global primary nickel supply has been mitigated by an acceleration of NPI production from greenfield and brownfield capacity in Indonesia.

A significant milestone was achieved in H1 2020, as production of NPI from Indonesia overtook supply from China for the first time. As a result of this strong performance, Roskill now forecasts a slight y-o-y rise in nickel supply.    

This increase in supply, coupled with lower demand, has led to the nickel market switching to surplus after registering four years of deficits. Given a market that is currently oversupplied, it is somewhat counterintuitive that the nickel price should stage such a strong rally through June and September.

The LME nickel cash price reached a high of US$15,660/t on 1 September from a COVID-19 low of US$11,055/t in March. Roskill believes the detachment between the nickel price and market fundamentals has been the result of improving macroeconomic sentiment, combined with investor speculation and ore raw material shortage fears in China.

Roskill’s Nickel Outlook Update to 2029 will be released this month and outlines Roskill’s base-case COVID-19 impacts. These updates are provided in conjunction with the report, which seeks to address many of the key questions facing the industry.

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