Nickel remained volatile during the month of April. The prices jumped higher on the back of Chinese demand outlook and positive equity markets but corrected sharply as the sustainability of the buying was questioned. Slowdown in global demand and increase in physical stocks have affected the prices of most of the non-ferrous metals. The expectations for the bearish trend in Base metals to continue are high even in 2009.
Nickel, which generates most of the demand from steel sector, has been quite volatile since the start of April. The domestic prices were in the region of Rs 480 per kg on 31st March 2009 in the futures market but later on spooked to Rs 637 per kg levels on 17th April 2009, marking a rise of 32%. Short covering at lower levels and fresh buying positions ignited the prices. However after 17th April 2009, the prices saw consolidations after which bears again entered into the market to crash the prices. The prices once again collided towards Rs 564 per kg by 22nd April 2009.
World Steel Association’s preliminary figures for 2008 stated that the World stainless steel production was down by 25.9 million metric tons (mmt) or 6.9% on a Y-o-Y basis. This is a second year in a row that World stainless steel production got decreased.
Stainless Steel production in Asia (excluding China) declined by 10.3% to 8.1 mmt in 2008. China which accounts for 27% of the stainless steel produced in the world witnessed reduced production to 6.9 mmt or 3.6%. The second biggest stainless producing region, Western Europe/Africa, reported a decrease in stainless steel production of 4.8% to 8.3 mmt in 2008.
World steel association has forecasted that for the year 2009 apparent steel use is expected to decline by 15% to 1018.6 mmt in 2009 after a decline of 1.4% in the year 2008. India is projected to have a positive growth of 2% for apparent steel use in 2009. The association expects Chinese apparent steel usage to decline by 5% in 2009. The last time China recorded a negative growth was in the year 2009.
The latest report from International Nickel Study Group (INSG) suggests caution in the current Nickel environment. The group suggested that there is huge amount of uncertainness in the global markets and the impact on the supply and demand of Nickel was not fully known. World primary Nickel usage (consumption) for the year 2007 was 1.31 MT which decreased to 1.29 MT in 2008. The usage is expected to decline further to 1.18 MT or 8.5% in the year 2009.
The production on the other hand was 1.42 MT in the year 2007, the same declined to 1.39 MT in the year 2008, a further decline to 1.26 MT or 9.35 % is expected in the year 2009.
China Iron and Steel Association (CISA) in its latest report for March stated that steel price index stood at 97.59 points, down 44.72 points, or 31.42 percent, from the corresponding period previous year, and was lower than the level of 100 points in April 1994 when China first published the steel index. Meanwhile, the country exported 5.14 million tons of steel products in the first quarter of this year, down 54.9 percent year-on-year; and produced 124.52 million tons of crude steel in the period, equal to annualized 504.99 million tons. The slowdown of steel-consuming sectors and high steel output was the cause of fall in the fall in exports and prices.
The production on the other hand was 1.42 MT in the year 2007, the same declined to 1.39 MT in the year 2008, a further decline to 1.26 MT or 9.35 % is expected in the year 2009.
China Iron and Steel Association (CISA) in its latest report for March stated that steel price index stood at 97.59 points, down 44.72 points, or 31.42 percent, from the corresponding period previous year, and was lower than the level of 100 points in April 1994 when China first published the steel index. Meanwhile, the country exported 5.14 million tons of steel products in the first quarter of this year, down 54.9 percent year-on-year; and produced 124.52 million tons of crude steel in the period, equal to annualized 504.99 million tons. The slowdown of steel-consuming sectors and high steel output was the cause of fall in the fall in exports and prices.
LME Nickel kept on ascending all through April. Nickel is at its 3 months high levels. In April alone the prices have zoomed by almost 18% so far. LME Nickel three-month forward contract is at current $ 11450 per ton, a level not seen since February 2009. The descent of LME stocks has caused the rise in Nickel. In April the stockpiles were at 106518 tonnes compared with 107682 tonnes at the end of March, a fall of 1%. The fall has not been substantial and will not be able to hold prices at higher levels for long.
For the first three months Indian Crude steel production didn’t show any notable move. In January the production of Crude steel was 4.57 mmt, the production slipped to 4.1 mmt in February but again spiraled towards 4.5 mmt in March.
Companhia Vale do Rio Doce (Vale) announced that it has taken further steps to adjust its nickel production to the evolution of global demand. In light of a global recessionary environment, Vale retains the option of managing production and project execution according to its assessment of market conditions.
Vale decided to slowdown the conclusion of the Onca Puma nickel project, which was previously scheduled to come on stream in January 2010, with a nominal capacity of 58,000 metric tons of nickel in ferronickel. Global market production forced Vale to postpone the project by an year.
Vale also informed of shutting down its Sudbury nickel mining and processing activities for a period of eight weeks from June 1 to July 27. In addition, the processing facilities of precious metals a by-product of nickel mining in Sudbury, Ontario, will also be shutdown from June 1 to July 27, 2009.
Vale also informed of shutting down its Sudbury nickel mining and processing activities for a period of eight weeks from June 1 to July 27. In addition, the processing facilities of precious metals a by-product of nickel mining in Sudbury, Ontario, will also be shutdown from June 1 to July 27, 2009.
Sudbury is one of the largest nickel producing sites in the world and last year its mines provided the feed for the production of 85300 metric tons of finished nickel, 31% of Vale’s output.
In another news, Norilsk Nickel International, a subsidiary of OJSC MMC Norilsk Nickel, announced that it will suspend its Black Swan and Lake Johnston nickel operations (Western Australia), placing them under care and maintenance effective immediately.
In another news, Norilsk Nickel International, a subsidiary of OJSC MMC Norilsk Nickel, announced that it will suspend its Black Swan and Lake Johnston nickel operations (Western Australia), placing them under care and maintenance effective immediately.
This decision was taken on the grounds of a structural review and the Company’s resolution to place the Cawse and Waterloo projects under care and maintenance in November 2008.Today’s announcement is largely the result of the prevailing economic climate and its impact on the nickel price.
Outlook:
Significant prices volatility is expected in Nickel prices in coming days. The prices are expected to recover modestly in the second half of 2009, while the first half will remain depressed. Australian Bureau of Agricultural and Resource Economics (ABARE) expect spot prices of Nickel to average around $ 10500 per ton. Nickel stocks are expected to increase to around 6.6 weeks of world consumption.
In China, the prices of refined Nickel Domestic nickel prices have surged from 90000 yuan per tonne to almost 130000 yuan per tonne, following a recent rally of international nickel prices. But the rise in prices was a results of speculation rather than demand recovery from the consumers. Investors were also anticipating tight domestic supply which caused Nickel prices to firm. The refineries which are still running will be producing lower than the normal. Therefore, lower revenues at refineries and refined Nickel production is also expected to decline.
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