Nickel prices have been weak recently, haunted by pessimism especially after SHFE nickel 2311 dropped below Yuan 150,000/tonne on September 27, which kept falling on the first trading day post China's eight-day National Day holiday. The downstream players, including stainless steel mills, thus stood on the sidelines and awaited the latest traded prices of nickel ore during the holiday.
Source: SHFE
1. Nickel prices gradually lose momentum with bears being digested
Laterite nickel ore prices rose through September but weakened in the second half when the downstream stainless steel mills cut the production.
Source: Mysteel
In early September, nickel ore prices gained strong support from lingering RKAB production approval issue in Indonesia. Meanwhile, domestic clients actively stockpiled on insufficient in-plant stocks, boosting nickel prices.
In the second half, domestic stainless steel mills slowed the purchasing of nickel ore amid falling NPI and stainless steel prices. And the market was less intensive as the bears were digested.
However, falling stainless steel prices prompted the mills to slash the production, weighing on nickel ore prices.
2. Nickel ore inventory accumulated ahead of rainy season in the Philippines
The nickel ore inventory across 14 ports in China continued to rise in September, which totaled 10.74 million wmt as of end-September, up 3% from August. Among them, 10.46 million wmt were from the Philippines, as the arrivals from the country rose rapidly as Suligao, a major mining area in the Philippines, will kick off the rainy season soon.
Source: Mysteel
Nevertheless, the port inventory is expected to fall in October with the arrivals dropping amidst the rainy season.
3. Summary
Nickel ore prices are primarily constrained by extensive production cuts among downstream players at present, while the nickel ore supply in Indonesia is expected to tighten further in the fourth quarter should there be no new production application approved in the country.
Coupled with the Philippines entering rainy season gradually, nickel ore prices are expected to fall fractionally in the near term.
Written by Aggie Hu, huchenying@mysteel.com