Nickel prices hit lowest level since 2009

Nickel has dropped to its lowest close on the London Metal Exchange since July 2009, although the trend is unlikely to stimulate more buying in the US market, traders said.

The LME’s three-month nickel contract closed the official session June 11 at $14,560 per tonne ($6.60 per pound), its lowest level since closing at $14,415 per tonne ($6.54 per pound) July 13, 2009.

The price plunge is unsurprising, given the global supply surplus and “concerns about weakness in demand from the stainless sector,” Jim Lennon, director of commodities research at Macquarie Group Ltd., told Metal Bulletin sister publication AMM. “On our calculations, which are fairly conservative, the global nickel market is in surplus by over 80,000 tonnes. We just haven’t seen enough production cut out of the market.”

He said there has been a “quite a ramp-up” in nickel pig iron (NPI) production in China. “The breakeven for these NPI facilities is in the $12,000- to $14,000-per-tonne range, so even with current LME you still see those guys in business.”

Gordon Buchanan, a senior trader at London-based Stratton Metals Resources Ltd., attributed the price plunge to “weaker Chinese sentiment, weakness in the LME complex as a whole, plus equities (being) under pressure globally,” adding, “We may make further lows tomorrow if copper sinks below $7,000 per tonne.”

Buchanan said that he doubted there will be much “fresh buying” prompted by the price plunge, as “most of the larger mills buy on the monthly average.”

A trader based in the United States agreed that the plunge was unlikely to spur renewed demand for nickel in the domestic market. “I don’t think the lower prices are getting any buyers out, because people figure it will continue to fall,” he said. “On its way down, I haven’t seen any more inquiries than we did $2 per pound ago. I just don’t think there’s any demand to stimulate.”

This report was first published by American Metal Market
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