STEEL NEWS

Boom in stainless steel will support nickel prices for several months

Healthy demand from stainless steel mills and battery makers for electric vehicles is expected to support nickel prices in the coming months, but increased shipments from a leading Indonesian manufacturer are likely to affect prices next year, Reuters reports.

Base nickel prices on the London Metal Exchange, at $ 19,500 per tonne, are up more than 20% since April and are the highest since February. A few months ago, a surplus was expected in the second half of this year, but now a deficit is more likely.

“This year has seen one of the most significant changes in nickel consumption, driven by a boom in the stainless steel and battery markets,” said Macquarie analyst Jim Lennon.

"But the steady increase in production in Indonesia, coupled with the expected slowdown in nickel consumption, should push the market towards oversupply in 2022/23."

Macquarie expects demand to rise to 2.8 million tonnes this year, up 16% from 2020, with a deficit of 83,000 tonnes. In March, he predicted an increase in demand for nickel at the level of 10.6%.

Production of 300 series stainless steel with 8-9% nickel increased 36% in the first half of 2021 compared to the same period last year.

Stainless steel accounts for about 70% of global nickel consumption, while electric vehicle batteries consume less than 10%, but the latter number is expected to rise in line with electric vehicle sales as the world moves to reduce carbon emissions.

Deliveries are under pressure this year due to disruptions at nickel mines in New Caledonia, Russia and Canada. Analysts estimate that the market lost about 60,000 tonnes of nickel due to these disruptions.

COVID-related restrictions also increase the likelihood of delaying new projects in Indonesia's leading manufacturing sector this year.

Citi analyst Oliver Nugent expects nickel prices to hit $ 20,500 over the next three months and calls rolling stocks a sign of "looming physical tension."

Nickel stocks in London Metal Exchange approved warehouses of 219,180 tons have fallen more than 15% since April, while nickel stocks tracked by the Shanghai Futures Exchange are close to five-year lows.

“We continue to maintain a bearish trend in 2022 as we expect significant growth in supply from Indonesia,” Nugent said.