There were few surprises in the nickel market last week. Prices rebounded as short covering started, which is what we would expect after such a large short position had been built up recently. The market is still very short, so there is more to come, as long as sentiment continues to improve, but that is not a foregone conclusion in the current environment. On the stock front, inflows kept coming as the underlying surplus has nowhere else to go while demand remains soft, evidenced by premiums remaining flat again last week. Financing deals are starting to take off in nickel, but although returns are steadily improving they are only around the 1% mark, compared with up to 7% in aluminium and zinc. At least production cuts are emerging, and there may be more in the wings, but there is little chance of seeing the scale of cuts needed to rebalance such an oversupplied market, unless prices fall further still.
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