Nickel's Slip: Global Surplus and Sluggish Demand Spark Year-End Price Plunge

  • Kedia Advisory
  • Commodities News
Nickel's Slip: Global Surplus and Sluggish Demand Spark Year-End Price Plunge

Nickel prices tumble as the global market grapples with a surplus fueled by increased production, rising inventories, and muted consumption. LME nickel registers a staggering 44.6% YTD drop, while SHFE nickel follows suit with a 35.8% decline, marking the metal as the year's underperformer. The imbalance between growing supply and lackluster demand, coupled with burgeoning stockpiles, underscores the challenging landscape for nickel investors, raising concerns about the metal's trajectory in the coming year.

London Metal Exchange (LME) Performance: Three-month nickel on the LME fell 1.3% to $16,635 per metric ton, marking a significant year-to-date decrease of 44.6%.

Nickel Price Decline: Nickel prices experienced a decline on Thursday due to subdued consumption and an increase in production and inventories in exchange warehouses.

Shanghai Futures Exchange (SHFE) Trends: The most-traded January nickel contract on the SHFE dropped 1.5% to 129,530 yuan ($18,125.46) per ton. SHFE nickel has witnessed a year-to-date drop of 35.8%.

Global Nickel Market Dynamics: Indonesia has witnessed a substantial increase in investments in downstream nickel production, contributing to a surplus in the global nickel market. Some Chinese producers have also ramped up nickel cathode output.

Supply and Demand Imbalance: Despite the growth in nickel supply, consumption has not improved, resulting in a surplus pattern. The overall outlook for nickel supply and demand is bearish.

Nickel Stockpiles: Nickel stockpiles in LME approved warehouses reached 53,724 tons, the highest level since January 10. SHFE-tracked warehouses also saw inventories climb to 13,358 tons, the highest since January 29.

Global Nickel Deliveries: Recent deliveries into the LME system have been directed to warehouses in South Korea, Taiwan, Singapore, and the Netherlands.

China's Nickel Pig Iron Prices: Prices for China's nickel pig iron dropped to 907.50 yuan per ton by December 19, reflecting a significant year-on-year decrease of 33%.

Conclusion

The nickel market faces headwinds as production expansion and sluggish demand paint a grim picture for prices. With stockpiles reaching new highs and a surplus persisting, the downward trend may continue. Investors need to carefully navigate these challenges, keeping a watchful eye on global economic dynamics and nickel market fundamentals to make informed decisions in the ever-evolving landscape of nonferrous metals.

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