Share of Russian, Chinese nickel in LME warehouses grows amid weaker demand

Nickel metal produced in China has appeared in the London Metal Exchange warehouse system for the first time since the exchange began reporting its country-of-origin data in January 2023

In its most recent data release on October 13, figures show that a total of 1,236 tonnes of Chinese produced metal sat in the warehouse in September, up from 0 tonnes in August.

This appearance of metal was part of a broader increase in material in the LME system with total open tonnage increasing by 14% from August to September.

Of this 14% increase, Australia- and Russia-origin material remains dominant, despite the appearance of material from China.

Australia-produced material is the dominant origin on the exchange, accounting for 56% of material, meanwhile Russia-origin stock represents 23%.

There were significant increases in the amount of Russian material on the exchange from August to September though, with the total amount of Russian material increasing by 32% month on month.

Recent inflows of material onto the exchange have largely been the result of softer demand for nickel metal within the physical market, with the International Nickel Study Group forecasting that global stainless-steel production will be down close to 1% globally in 2023.

This weaker demand has also led to lower prices, a trend that is reflected across the base metals, similarly prompting inflows of material into the LME system.

But the rapid increase in the presence of Russian units for nickel does buck the overall trend for base metals which saw the percentage share of Russian material decline in September.

The official nickel cash price monthly average was down by 4% month on month in September at $19,621 per tonne.

Nickel prices continue to decline though, with the nickel cash official price most recently closing at $18,330 per tonne on October 13, down by 1% since the beginning of the month.

This time of weaker physical demand and lower prices has also been met with significant capacity announcements for the production of nickel metal from Chinese nickel producers, using class 2 nickel products such as nickel pig iron (NPI) and matte as feedstocks.

These new capacity announcements had previously raised concerns among some market participants, due to fears that the material could rapidly appear on the exchange and push overall prices lower.

In an effort to increase liquidity on the exchange, the LME announced a fast track listing approach for new brands of nickel in March, with the exchange since approving the deliverability of Huayou Cobalts cathode brand ‘HUAYOU’ in July and is currently reviewing the deliverability of fellow Chinese producer GEM.

There are currently two deliverable brands of nickel produced in China, both for full plate cathode.

“The recent deliveries of Chinese metal into warehouses are significant as it potentially signals a wider upcoming trend,” a trader told Fastmarkets on the sidelines of LME Week in London last week.

Others though were less concerned.

“Chinese material makes up a very small percentage today, for us the bigger concern is the increased amount of Russian material on the exchange,” a consumer noted.

Chinese produced metal made up around 3% of the total material on the system for September.

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