Andy Home of Reuters reported that London Metal Exchange nickel stocks continue to rise, “every couple of days bringing a fresh record high.” That, he said, is odd considering Indonesia’s nickel ore export ban, put in place at the beginning of the year, “effectively removed almost a third of global mine supply.”
Continuing, Home notes that while this “apparent dichotomy” has halted nickel’s bull run, it doesn’t mean the bull story has gone away.
Such divergent trends can’t co-exist for long, probably only as long as China’s NPI sector can survive on stockpiled Indonesian ore and lower-grade Philippines ore.
Citi believes the time is fast approaching when raw materials pressures translate into NPI capacity closures.
After holding steady at around 225,000 tonnes in the first half of this year, it forecasts China’s NPI output to contract by 38 percent year-on-year in the second half.
It’s not an outlier view. In the latest Reuters poll of analysts only two out of 12 offering a market balance view for next year expect anything other than deficit.
It’s just a matter of timing.
But until there is tangible sign of scarcity in the refined part of the nickel market, the LME three-month price is going to struggle to resume its bull run.
That’s not to say that the bulls have gone away. It’s just that rather than betting on a stagnant outright price, they’ve switched their money into the LME options market.