This year will be different. That’s what some analysts are saying about the price of nickel, a metal used in making stainless steel that was supposed to surge last year but instead plunged to a 12-year low.
While the slump of 2015 has continued this month, the consensus forecast is that the long-expected reduction in supplies will finally materialize.
The bet is that users will draw down inventories, mine output will shrink because most of the industry is losing money, and demand will improve in China, the world’s biggest consumer. That should spark a rally, albeit from prices that are 44 percent lower than a year ago, the bulls contend.
“It’s quite a brave person that comes out and says there’s going to be a strong rally,” Caroline Bain, a senior commodities consultant at Capital Economics Ltd., said by phone from London. “I’m a bit cautious that we can have a big rally, but at least all the indicators are pointing in the right direction. The main thing is there is a deficit now, so we do expect to see some of the stocks to start to come off.”
That’s what was supposed to happen last year, when prices fell short of the consensus target by about a third. After Indonesia, the world’s largest producer of nickel ore, banned exports in 2014, prices jumped to a two-year high and banks including Goldman Sachs Group Inc. predicted global shortages in 2015.
Instead, supplies from the Philippines proved more than adequate, China’s stainless-steel industry slowed and inventories ballooned. Last year, prices fell more than any other base metal on the LME.
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