After drifting off from a spring high, the nickel price has flatlined in the second quarter (along with much of the rest of the metals complex).
However, the metal has put in a surprisingly strong performance in just the last week due to Indonesia’s announced export ban spooking market concerns about supply, according to the Financial Times.
Since last week, nickel has reached an 11-month high, jumping 9% to above $14,000 a tonne, the article reports, extending gains since the start of the year to 30%.
In contrast, copper is up just 1.2% in 2019, while aluminum has gained only 2.5%.
Robust demand in China has helped nickel’s overall position this year, but the recent export ban has added fuel to the fire.
Indonesia is the world’s second-largest exporter of nickel ore after the Philippines. In an unexpected move, Jakarta pledged last week to stick with plans to stop exports of unprocessed nickel ore in 2022.
The ban is aimed at encouraging the domestic development of value-added industries, such as refined nickel and even stainless steel production, a policy that has had its ups and downs in recent years but broadly proved successful in encouraging domestic refined metal production.
The Philippines, the top nickel producer, and Indonesia are major ore suppliers to China’s nickel pig iron industry, which currently accounts for some 20% of global nickel production.
Much of the demand for nickel is being driven by stainless steel production in China. So far this year, that demand has been strong. However, as the Financial Times notes, inventories have also been rising, raising questions about the underlying strength of the Chinese market facing the headwinds of a trade war and slowing growth.
Maybe consumers should not be panicking too much about rising nickel prices — a pullback after such a strong rise is likely, especially coming into the summer season when demand in China and western Europe is likely to soften.
Prices could fall back a little from current highs, but they are unlikely to return to turn-of-the-year levels.
By Stuart Burns