During the 2024 LME Week, nickel emerges as the unexpected star performer, despite being labeled the “least liked” metal among base commodities. A survey by Macquarie reveals a preference for shorting nickel, while metals like copper and tin are seen as more favorable long positions. The surge in nickel prices is attributed to fresh economic stimulus measures from China.
The market’s distaste for nickel stems from its fragmented pricing structure, with LME-grade nickel prices diverging sharply from nickel pig iron. Currently, NPI prices are at a discount to LME nickel, but analysts expect this gap to narrow.
The rise in nickel inventory on the LME, driven by increased production in China and Indonesia, has escalated bearish views. Indonesia, now accounting for 63% of global supply, has ramped up production despite challenges like declining ore grades and regulatory delays.
Supply constraints linked to ore shortages could potentially limit prices, but concerns about weakening demand from Europe and the U.S. are adding pressure. The stainless steel and electric vehicle industries, major consumers of nickel, are showing signs of slowing.
Despite the recent rally, nickel faces challenges in overcoming negative sentiment in the market. Potential supply disruptions and a gradual recovery in stainless steel demand offer glimmers of hope, but structural challenges cloud nickel’s future.
Overall, nickel remains in a delicate balance, with prices vulnerable to macroeconomic shifts and changes in battery technology. The evolving dynamics within Indonesia present uncertainty in the market, with potential upside risks for nickel prices if disruptions escalate or if demand stabilizes unexpectedly.