LONDON, June 28 (Reuters) – Two years ago the chances of a nickel price recovery seemed remote, but that mindset has changed as shrinking stocks and falling supplies have created a bullish backdrop for the stainless steel ingredient.
Benchmark nickel on the London Metal Exchange recently hit $16,690 a tonne, the highest since December 2014, after falling to 13-year lows below $8,000 a tonne in February 2016.
A retreat to around $15,000 a tonne was triggered by fears of a trade war between the United States and China, the world’s two largest economies. However, prices are still up about 70 percent since June 2017 when expectations of deficits began.
Higher prices have not, as some expected, led to rising output and deficits are likely to be a feature for some years. “There is not enough supply, which means stocks have to be drawn,” said Jim Lennon, Managing Director at Red Door Research. “The environmental clampdown in China has taken out about 35,000 tonnes of nickel pig iron capacity since May.”
That is nearly two percent of global nickel demand estimated this year at around two million tonnes and one reason why top consumer China has been importing.
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