Nickel/RecoveryVemains elusive

摘要

The much-awaited recovery in the stainless steel and nickel markets has yet to emerge. True, some positive signs have started to appear but in general demand is depressed and stocks of nickel are high. Under these circumstances, LME prices have remained surprisingly robust. The LME cash price has recovered from its early September trading range of 26,000-28,000 dollars/t to reach levels of above 30,000 dollars/t in the first half of October. But despite this resilience, the market has remained firmly in contango, with the cash to 3-month spread averaging 430 dollars/t in the first two weeks of October compared with 305 dollars/t in September and 227 dollars/t in August. Easier market conditions have also prompted the LME to announce that the special rules on lending by dominant long position holders has been rescinded with immediate effect. Changes to the lending guidance were first implemented in June when the market was characterised by extreme tightness. In a recent statement, the LME argued that circumstances no longer require special measures. The fact that LME nickel prices have recovered from the lows of August and early September is in part due to market expectations. Underlying demand for stainless steel and consequently nickel has, by all reports, remained solid suggesting that once the oversupply of stainless steel has been eradicated by mill cutbacks, demand should resume again in earnest. In turn, a revival in the stainless sector should prompt a reduction in nickel inventories, paving the way for an upturn in buying activity and prices. But so far, even though there has been a modest improvement in stainless mill order books, mainly in Asia, a major turnaround in demand does not appear imminent. Cutbacks are being phased out slowly, which is positive news, but full capacity utilisation is still some months away, particularly as the mills will not want to risk re-building stocks ahead of year-end.