Stainless steel demand props up nickel prices

LONDON — Nickel prices retreated on Wednesday, but held near nine-month highs due to healthy demand from China’s stainless steel mills and falling supplies from the Philippines, a top ore exporter, supporting sentiment.

Benchmark nickel ended down 1% at $ 11,595 a ton as a failure to break higher triggered a bout of profit taking. The metal had peaked on Tuesday at $ 11,885 to register its highest price since November. Nickel prices are up more than 15% this year.

“Stainless steel demand in China and elsewhere has surprised on the upside and talk about nickel consumption in lithium-ion batteries has helped,” Societe Generale analyst Robin Bhar said.

“Supplies have been under stress. The Philippines exported less for various reasons, including monsoon rains, mine inspections and shutdowns. Some NPI (nickel pig iron) capacity has been shut in China because of environmental inspections.”

UBS raised its stainless steel demand growth forecast for this year to 3.50% from 1.10% previously. Its estimate for 2018 is 6.20%.

“China’s appetite for stainless steel products… is the main reason for our upward revision,” UBS analysts said.

The bulk of the world’s stainless steel is produced in China, which accounts for about two thirds of global nickel demand.

PHILIPPINE FACTOR

Nickel ore output in the Philippines fell 24% in the first half as several mines stopped operations because of government sanctions and bad weather. At least eight nickel mines have had operations suspended since last year for environmental breaches.

Lower supplies from the Philippines have been partly offset by Indonesia, where a ban on exports has been partially lifted. Indonesia is also exporting nickel pig iron.

Nickel stocks in LME warehouses, up more than 11,000 tons since Aug. 11, could weigh on prices. However, traders say that metal earmarked for delivery — canceled warrants — at above 36% suggests a tighter LME market.

Upside resistance for nickel is seen at $11,942, the upper Bollinger band. A break may see a test of $ 12,000 and eventually the $12,145 peak hit on Nov. 28. Support is at $11,000 and below that at $10,900, near the 21-day moving average.

Among other industrial metals, copper fell 0.30% to $6,769 a ton, aluminum slipped 0.40% to $2,087.50, zinc gained 0.40% to $ 3,096, lead ceded 0.40% to $ 2,370 and tin gained 1.20% to $20,600. —