Norilsk raises nickel deficit forecast for 2016 as price slumps
This article by Yuliya Fedorinova appeared in Mineweb and may be of interest. Here is a section:
China’s nickel pig iron output, a cheaper substitute for refined nickel, should fall as ore supplies from the Philippines are depleted, the Russian company said on Monday. Outside China, “we see an increasing pressure on high cost producers to cut production,” Norilsk said.
The global nickel deficit will be at 60,000 metric tons in 2016 and the market will likely be balanced in 2015, according to Norilsk. In its previous market update in March, the producer saw a deficit of 20,000 tons this year that would widen to 55,000 tons in 2016.
Nickel prices are near a six-year low after China’s economic growth slowed and London Metal Exchange inventories reached an all-time high of 470,000 tons in early June. They have since declined to about 455,000 tons. The chance of nickel prices continuing to fall is small because more than 60 percent of producers are already losing money, according to the company.
“A sizable reduction of LME inventory is widely recognized as a major signal of improved nickel market fundamentals,” Norilsk said.
Sentiment towards the industrial metals market has become increasingly bearish as prices have fallen and commodity led economies have come under pressure. The question then is to what extent this bad news is already in the price.
Nickel is now back testing the region of the 2009 low near $10,000. This level also represented the upper side of the long-term base before the commodity bull market started more than a decade ago. It has at least steadied over the last month but a sustained move above the 200-day MA will be required to signal a return to demand dominance beyond the short term.
The London listed, US Dollar denominated Norilsk Nickel has been ranging mostly above $15 since 2012. It posted an upside weekly key reversal last week and held the majority of the gain this week. Some additional follow through on the upside would take it back to test the region of the 200-day MA but a sustained move above the trend mean will be needed to confirm more than temporary support.