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Continued growth in Chinese stainless steel capacity and expectations for modestly higher stainless steel output could push stocks lower from the second quarter of the year, Metal Bulletin Research told Asian Ferro-alloys conference delegates in Hong Kong.
Looking at the bigger picture, Chinese nickel inventories are already trending lower, MBR said. Stocks in Shanghai bonded warehouses fell to about 63,000-70,000 tonnes at the end of February, down slightly month-on-month but 10% lower than a year ago.
Antaike estimates imply off-exchange Chinese nickel stocks that are not in bonded warehouses were about 35,600 tonnes at the end of January, down from a high of around 70,000 tonnes in June last year, it said.
Although stocks of the Shanghai Futures Exchange have crept higher this month from 89,274 tonnes at the end of February, this is likely to be a “hangover” from the Chinese New Year holiday – it is quite normal for inventories to rise in the first quarter, it added.
SHFE inventory, Shanghai bonded warehouse stocks and other Chinese stocks of refined nickel were a combined 192,500 tonnes at the end of January, MBR calculated, down about 60,000 tonnes since the summer of 2016.
Including estimates for the nickel content of Chinese NPI and ore stocks, total contained nickel inventories in all forms in China stood at about 292,000 tonnes at the end of January, it said, down from a peak of 378,000 tonnes in July last year.
The decline also appears to have picked up pace since November, MBR added. With the peak demand season ahead and a deficit year forecast overall, this trend should continue.
Although that should be enough to extend the cyclical price recovery, “it is hard to envisage anything more than a very shallow gradient to that recovery” until stocks fall by at least half from current levels, MBR said.
It will take many years before real tightness returns to the nickel market, MBR concluded.
On the London Metal Exchange, nickel stocks stood at 382,176 tonnes on March 22, up from 360,096 tonnes on October 12 last year, according to LME data.