(Correcting INSG figure for a 37,000-tonne deficit for the whole of 2016 to a deficit for the first half of the year)
Chicago 20/09/2016 - The nickel market is expected to extend its current momentum into 2017 after production shortfalls and an uptick in global demand helped the metal to recover from a 13-year low, speakers said at the Institute of Scrap Recycling Industries (ISRI) roundtable here.
Last year, the mood at the conference was dreary, with market participants envisioning years of overproduction and citing worries over the state of US monetary policy.
But the recent mine closures in the Philippians and strong Chinese demand - primarily driven by a healthy housing sector - have reignited talks of prices returning to $12,000 per tonne in 2017.
"Positive sentiment in the nickel market has come back much earlier this year. At the beginning of 2016, there has been a recovery of investor sentiment," Mu Li, a senior analyst at CPM Group, said during the roundtable discussion.
Li cited the liquidation in short-positioning and the major increase in gross long positions since the end of June as the principal driver in the price rally. Additionally, Chinese demand was up nine percent during the first half of 2016 compared with the previous year.
SUPPLY CURTAILMENTS
Since his election, Philippine President Rodrigo Duterte has targeted the mining industry, arguing that the country can survive without an industry that contributes roughly one percent to its GDP.
The Philippines have so far suspended the operations of eight domestic nickel mines for environmental reasons, which represents about 10 percent of its overall capacity.
According to Barry Jackson of Anglo American, more shutdowns could be looming - the country will issue its long-awaited mine audit this Thursday.
A possible nationwide crackdown has kept nickel prices above $10,000 but China's reduction in output is also providing support. Chinese production is down 14 percent year-on-year and has fallen 30 percent since 2014.
The International Nickel Study Group (INSG), meanwhile, has forecast a global deficit of 37,000 tonnes for the first half of 2016.
"That's a very strong level of deficit... there are lot more reasons to be more optimistic from the demand side but also from the supply side," Jackson said during his presentation.
SCRAP FORECAST DOWNBEAT
While miners and dealers will be happy if the aforementioned forecasts hold, the expectations for the scrap market are less rosy moving into the fourth quarter, Steve Jones of Allied Alloys Midwest warned.
Scrap prices moved in concert with the overall rebound in nickel but Jones is starting to see a slowdown as the fourth quarter approaches and argues that nickel producers have started to oversupply the US.
"This a short-term effect and 2017 will see a recovery [in prices]," Jones concluded.
(Editing by Tom Jennemann)