Nickel prices resumed their rally from the previous session with the metal’s most-traded contract on the SHFE reaching a more than two-year high.
The most-traded January nickel contract on SHFE stood at 100,880 yuan ($15,251) per tonne as of 02:54 GMT, up 1,540 yuan from the previous session’s close.
The contract had reached a high of 101,750 yuan per tonne earlier in the session – its highest since June 2015 – as prices continue to find support from the general bullish tone in the nickel market due to strong physical premiums in China and elsewhere as well as optimism surrounding electric vehicle (EV) battery demand.
Shanghai bonded in-warehouse nickel premiums are at historically high levels, standing at $300-320 per tonne on October 31 after reaching an all-time high of $330-350 per tonne on October 24, according to Metal Bulletin’s assessment.
“Nickel once again led the sector higher … after strong gains earlier this week. Investors, buoyed by comments from the LME week, continue to pile in,” ANZ Research noted.
“Futures on the Shanghai Futures Exchange were up by the exchange’s limit in trading late yesterday, while on the [London Metal Exchange] it hit $13,000 per tonne for the first time since June 2015,” it added.
However, INTL FCStone analyst Edward Meir warned that there are headwinds for the nickel market too.
“it is important to note that EV sales remain a modest percentage of the market. In addition, sales remain critically dependent on subsidies, practically the world over,” Meir said.
Another factor to consider in the EV battery market is that with any rise in input costs, nickel faces the threat of import substitution, demand miniaturization or even destruction, and in extreme cases a complete overhaul of the makeup of the battery, according to Meir.
High stocks in LME warehouses are yet another factor which could put downward pressure on nickel prices.
Nickel stocks in LME-listed warehouses stood at 381,444 tonnes at the start of business on November 1, which is “near the top of this year’s range,” according to Metal Bulletin analyst William Adams.
The US Federal Open Market Committee’s statement effectively provided the ‘all clear’ for a rise in US interest rates next month, according to ANZ Research, but market focus has now fallen to US President Donald Trump’s nomination of the next US Federal Reserve chair – with Fed governor Jerome Powell widely tipped to replace current Fed chair Janet Yellen.
The dollar has edged lower this morning with rising expectations that Trump will pick Powell, who is seen as more dovish on interest rates, putting pressure on the currency. The dollar index was at 94.51 as of 02:42 GMT on Thursday, compared with 94.67 at around the same time on Wednesday.
Base metals prices
Currency moves and data releases