Output cuts halt nickel price fall, more mine closures needed – by Louise Heavens (Reuters U.S. – March 16, 2016)


LONDON – Nickel’s freefall may have halted as output cuts move the chronically oversupplied market towards deficit, but prices are unlikely to recover sharply unless more loss-making mines close.

Prices for the metal used to make stainless steel have crashed more than 40 percent since the start of 2015 on rising stockpiles and weak Chinese demand, leaving around 70 percent of producers losing money, according to consultants at CRU Group.

But cutbacks, at a time when demand is steadying, should boost benchmark prices on the London Metal Exchange, which recently hit 13-year lows at $7,550 a tonne. It is now around $8,525.

“While we have no growth in demand we will have a 7 percent fall in supply, driven mainly by a fall in production by the nickel pig iron producers in China,” said Jim Lennon, senior consultant at Macquarie.

“The issue is that the deficit has to be sustained for a number of years before you see any tightness developing.”

The market is expected to swing into a 31,000 tonne deficit this year and a 34,000 tonne deficit in 2017, according to a Reuters survey of metals analysts.

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