Nickel price will be bullished for a long time.
Source: Ao Feng DateTime:2019-08-08
With global trade frictions escalating, the euro has fallen sharply, emerging market currencies have also been hit, while the dollar index has remained strong, hitting a level of 97 at one point, containing basic metals. On Wednesday night, zinc and lead fell more than 6 percent, copper and nickel falling more than 4 per cent. At home, market pessimism has eased, basic metals rebounded. Regarding nickel market, the author thinks, under the support of fundamentals, nickel price will be bullished for a long time.
Environmental normalization and inhibition of NPI output
Despite recent news that Indonesia will withdraw its export quota of 4.2 million tonnes of nickel, the broad trend of looser supply of laterite Nickel in China this year has been largely constrained by environmental constraints and has not been significantly released. Domestic nickel pig iron production was 253900 tonnes in the first seven months of this year, up 13.35% from a year earlier, but monthly output was significantly lower than last year, with profit levels better than last year, and fell 3.47% in July, according to SMM.
For the second half of the year, under the strict control of environmental protection in various parts of the country, it is difficult to follow up the increment, and Jiangsu and Liaoning have environmental protection groups. In terms of new capacity, although eight stoves in Shandong are expected to go into production at a rate of two a month after October, full release capacity is expected to reach March next year, and releases are limited under environmental pressure. Domestic NPI growth is expected to be around 35000 tons this year, lower than expected at the beginning of the year.
Stainless steel growth will drive nickel demand
Considering the total production of 300 series in China and Aoyama in Indonesia, the output growth rate reached 20% in the first half of 2018. Considering the insufficient processing capacity in the country and the progress of overseas market development, low-cost stainless steel billets and hot coils (3,954, -98.00, -2.42%) were imported into the country. Domestic stainless steel prices pressure back. But the domestic aspect because of the supply gap existence, the nickel price rises substantially, the steel factory profit is compressed. In the future, with the layout of overseas processing capacity and the expansion of the market, the inflow of domestic capacity will be reduced, which will ease the domestic supply pressure.
In the first half of 2018, the total output of 27 key stainless steel enterprises in China was 12.27 million tons, an increase of 6 tons compared with the same period last year, in which the growth rate of 300-series was only 1. The growth rate was mainly contributed by 200 series and 400 series, and the growth rate reached more than 10%. The main reason was that the 300-series production profit was lower than that of steel mills.
Due to the remarkable growth rate of stainless steel and the limited growth of domestic NPI environmental protection output, there is a gap in NPI, and because of the insufficient output of intermediate products, there is also a gap in the raw material for producing nickel sulfate, which needs to be filled by refining nickel.
This year's limited increase in global refined nickel production has led to a marked de-stocking of refined nickel, with exchange inventories falling to 264600 tonnes, down 186000 tonnes from the same period last year and 147,400 tonnes from the beginning of the year.
As the supply of nickel and iron fell short of expectations and stainless steel production capacity was put in, there was a gap in nickel metals, the overt stocks continued to degenerate, the expected support of superimposed new energy vehicles was added, nickel prices had been rising for a long time, and the nickel stocks in the previous period had been reduced to 18100 tons. There is still room for imagination in the follow-up. But with global trade disputes likely to escalate, with China and the United States facing upcoming $16 billion and $200 billion in commodity tariffs in September, macro uncertainty is expected and investors are advised to have more zinc nickel. In the future, the core fluctuation range of the main contract of Shanghai nickel (100710, -1650.00, -1.61%) is expected to be 110,000-118,000 yuan/ton.