Singapore 30/08/2016 - Nornickel – the recently rebranded Norilsk Nickel – said it is cautiously positive about the outlook of nickel given robust demand from the stainless steel sector and tighter supply from the Philippines, but warned about growing refined metal stocks and supply from Indonesia.
The prospects of ore supply from the Philippines remains unsettled due to the mining audit in the country – eight mines with total output of around 50,000 tonnes per year of contained nickel have been suspended, and another 100,000 tonnes per year of nickel mining capacities are at risk of failing the audit, Nornickel said in its interim report on Monday.
“In total, we believe that up to 150,000 tonnes of nickel units - eight percent of global supply - could be at risk,” the world’s largest nickel producer said.
The Philippines was expected to complete its mining audit in August but its findings have yet to be officially announced by the government.
In August, it was also reported that the Philippine Lower Chamber of Congress would seriously considered the introduction of an ore export ban mirroring the Indonesian mining legislation which had resulted in the ban on unprocessed minerals since 2014, the Russian nickel producer added.
From the demand perspective, government stimulus and ramp-up of stainless steel capacities in China would keep nickel consumption growth rates at robust levels at least till end of this year, Nornickel said.
Aggressive nickel restocking by stainless steel mills reported so far this year, coupled with rumours that the Chinese State Reserve Bureau is buying 30,000-50,000 tonnes of refined metal this year, should provide additional support for nickel price it said.
But Nornickel also warned of rising nickel pig iron (NPI) production in Indonesia, which is expected to deliver over 80,000 tonnes of nickel units this year, beating market expectations.
Despite nickel price being deep into the cost curve, a 25-percent nickel price recovery from February’s lows provided some relief to high-cost producers outside China, it said.
“Their cost-cutting efforts helped by mining currencies depreciation, combined with re-financing exercises, push back further long awaited industry rationalisation,” it noted.
While NPI production in China has dropped, ferronickel exports from Indonesia into China are surging.
Imports of ferronickel from Indonesia to China have jumped by a factor of 5.5 to 74,493 tonnes in July, taking imports to 390,706 tonnes in January-July - a more than four-fold year-on-year rise.
Nornickel also cautioned that visible nickel inventories represented by the London Metal Exchange and Shanghai Futures Exchange warehouses are high at 480,000 tonnes, which is approximately 80 days of global consumption.
“The high global nickel inventory is preventing the market from developing a physical deficit, and thus will be keeping a cap on the upside of price recovery in the near-term,” it said.
Nornickel said it continues to hold a neutral view on nickel price in the short-term while watching closely the developments in the Philippines.
Nonetheless, widening market deficits in 2016-2018 should support a sustained recovery of the metal price, it forecasted.
The LME three-month nickel price has held above the $10,000 per tonne since mid-July but came under pressure to fall below the level last week. The price was last at $9,880 on Tuesday, up $70 from last Friday’s close. The LME was closed on Monday due to a United Kingdom bank holiday.