Nickel prices drop to two-year low on oversupply

LME 3M nickel also tumbled on the same day at $17,995/t, the first time in 28 months that the contract dropped below $18,000/t.

Source: Mysteel

Oversupply is still the most important cause.

The lucrative profits of refined nickel encouraged established nickel smelters to ramp up or resume the production, while new electrowinning nickel projects came on stream constantly in 2023.

Active production resulted in rapidly rising refined nickel inventory. SHFE nickel warrants inventory recorded 7,108 t as of October 31, which was merely 2,000 t in early September. LME nickel inventory climbed swiftly as well.

Source: Mysteel

Mounting oversupply aggravated the pessimism among market players. A solid evidence is that SHFE 2401 saw an increase of short positions by some 6,000 t on October 31.

The demand side, on the other hand, has failed to offer new growth engines.

Specially, the alloy sector remains the largest downstream application field of nickel, with aerospace, military industry, infrastructure, and energy storage being the segments with great potential. The electroplating sector has been quite established, hence is unlikely to generate new demand.

The stainless steel industry now favors Indonesia's NPI with lower prices, thus reducing the use of domestic refined nickel. In the new energy sector, nickel intermediates like MHP and nickel matte have beaten nickel briquette for greater cost efficiency during the production of nickel sulfate.

Lastly, rising MHP imports from Indonesia have also weighed on domestic nickel prices. China's nickel hydrometallurgical intermediates imports stood at 912,500 t over January-September, up 46% from last year.

In summary, aggravating oversupply is expected to further bring down nickel prices, but the prices are expected to bottom on cost support soon.

Written by Aggie Hu, huchenying@mysteel.com