PRICE of nickel, which is used in stainless steel, moved up by 16% this week against the previous week due to production cuts and investment buying. Nickel futures on London Metal Exchange (LME) closed up 16% at $12,725 per tonne after making a high of $12,844. On MCX, the April contract closed up 15% at Rs 633 per kg against last weeks’s close at Rs 550.8.
Global production cut of the metal is expected to be 20% this year which is driving up the prices despite a weak demand from the steel industry. There has been over 33% increase of the LME inventories on a year-to-date basis that shows there is low demand for the metal. Nickel price also got support from the movement in global equities market. Results from Citigroup and General Electric were encouraging that supported the rally. Also, an upbeat turn in consumer confidence numbers eased investors worries about the slowdown in economies.
According to base metals analyst Reena Walia from Angel Commodities, stainless steel producers account for around 64% of nickel offtake, and they are struggling with new orders which are at all time lows right now. “Severe production cuts have pulled out around 20% of nickel supply from the market and this is the real cause for the rise in prices rather than improvement in demand,” she said.
She feels that prices could still receive support as a large number of nickel smelters have announced production cutbacks. “Short term trend in nicked looks bullish,” she said adding in the coming week, prices on the LME could trade in the range of $11,650-13,550 and the MCX April contract to trade in the range of Rs 580-675 per kg. Vibhuratan Dhara from Bonanza Commodity feels that prices will witness some correction in short term though the medium term outlook remains bullish.
Earlier in the week Brazilian miner Vale, the world’s largest iron ore producer, said it would cut its global nickel output to adjust to weakening demand following slow growth in the world economy. The company has delayed the start-up of its nickel project in Brazil by at least one year, indicating that the demand is grim. Vale has also shut down its Sudbury nickel mines and processing plants in Ontario for eight weeks .
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