The spread of coronavirus (Covid-19) to countries outside China has heightened investor anxiety over the near-term global economic outlook. Global risk appetite has fallen as Investors seek havens: equity markets have fallen exacerbated by the recent drop in oil prices while bond yields have decreased. LME base metal prices have remained under pressure with nickel at one point falling below the $12,000/t level. From a fundamental perspective, we forecast global nickel demand to fall by 9% in Q1 2020, y/y reflecting a 13% drop in Chinese consumption. This will be the largest quarterly decline since the GFC. We have also scaled back our forecast for Q2 nickel demand to a decline of 3.3%, y/y. These changes have increased our surplus for H1 2020 to over 75 kt. Continued risk aversion from investors while Covid-19 persists is likely to see the nickel price trade below $13,000/t near-term.
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