Nickel Down as Supply of Nickel Sulphate has been Sufficient, Weighing on Prices

  • Commodities Analysis

Nickel yesterday settled down by -0.71% at 1472.7 as the supply of nickel sulphate has been sufficient, weighing on prices. However, supply worries deepened on the back of Chinese power shortages and rising electricity costs in Europe amid falling inventory levels of the metal. Widespread power shortages in China and higher electricity prices in Europe have dampened production in some sectors of those economies.  
 
Kosovo’s sole ferro-nickel producer Newco Ferronikeli said it was shutting down production because of the increase in energy prices. In China, there were concerns that nickel smelters will be forced to curtail output amid power shortages, and a hike in electricity prices is expected to dent margins for many producers, potentially reducing supply. 
 
LME nickel inventories fell to 149,412 tonnes, their lowest since December 2019. ShFE stocks were last at 6,422 tonnes, hovering near a record low of 4,455 tonnes. On the fundamentals, domestic nickel ore inventory has been rising slowly, and the supply of raw materials remained tight. Meanwhile, the ferronickel plants were also affected by the power rationing. The tight supply of ferronickel has boosted the demand for nickel plates as an alternative. The output in October is likely to stay stable through the downstream production has been dragged down by production reduction policies.  
 
Technically market is under long liquidation as the market has witnessed a drop in open interest by -13.6% to settled at 1404 while prices down -10.5 rupees, now Nickel is getting support at 1462.7 and below same could see a test of 1452.7 levels, and resistance is now likely to be seen at 1490.5, a move above could see prices testing 1508.3.  
 
Trading Ideas:
# Nickel trading range for the day is 1452.7-1508.3.
# Nickel prices dropped as the supply of nickel sulphate has been sufficient, weighing on prices
# Widespread power shortages in China and higher electricity prices in Europe have dampened production in some sectors of those economies.
# Citi lowers nickel 0-3 month target to $17,000/t, with $18,300/t average for 4Q'21

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