(Bloomberg)
(Bloomberg)

Shanghai nickel jumps on tight stocks, demand recovery

  • LME nickel stocks have declined for 10 days in a row to under 200,000 tonnes
  •  Three-month LME copper edged down 0.4% to $6,452.5 a tonne, while ShFE copper fell by 0.3% to ¥49,400 a tonne

Beijing: Shanghai nickel prices rose sharply on Wednesday as low inventory levels and recovering demand kept the metal used to make stainless steel buoyant.

London Metal Exchange nickel stocks have declined for 10 days in a row to under 200,000 tonnes, while global exchange inventories of the metal were 47% lower year-on-year, according to Argonaut Securities.

"China's nickel ore inventory also decreased 12% year to date. This, coupled with a ... demand recovery outlook will underpin further increase in nickel prices in our view," analyst Helen Lau wrote in a note.

A downstream nickel Purchasing Managers' Index compiled by industry data provider SMM showed the first recovery in four months due to improved new orders, although the reading remains in contraction territory, Lau noted.

Fundamentals

ShFE Nickel: The most-traded May nickel contract on the Shanghai Futures Exchange rose as much as 1.9% to ¥106,460 ($15,859) a tonne, its highest since 10 October, before closing at ¥106,040.

■ Nickel: Three-month LME nickel gave up early gains to trade 0.3% lower at $13,615 a tonne by 0722 GMT. It jumped 3% in the previous session to post its highest close since 28 August.

■ Bumper Quarter: Shanghai nickel has gained 20.4% so far this quarter, which would mark its best quarter since the contract was launched in 2015. The gains made so far in 2019 exceed those in any full year. LME nickel is up 27% since the start of 2019 and set for its best quarter in nine years.

■ NPI: Brokerage Marex Specton said it believes the recent nickel rally has been supported by maintenance at nickel pig iron plants in China's Inner Mongolia. "That was fuelled by a shortage of electricity with plans for shutdowns over this and the near months," it wrote.

■ Zinc: Shortages for a fourth year running and historically low stocks of zinc are likely to propel prices of the metal to $3,000 a tonne over coming months.

■ Copper: Three-month LME copper edged down 0.4% to $6,452.5 a tonne, while ShFE copper fell by 0.3% to  ¥49,400 a tonne.

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