LONDON, Dec 5 (Reuters) – The nickel price bubble is slowly deflating but bears would be advised to tread carefully with a sharp fall in LME inventory threatening a repeat of the time-spread turbulence that rocked the London market in late September.
London Metal Exchange (LME) nickel surged to a five-year high of $18,850 on Sept. 2, from $12,000 per tonne at the start of July, as Indonesia brought forward to a ban on exports of nickel ore to January.
But the exuberance has dissipated with short-term fund money pulling out to leave LME three-month metal around $13,100 per tonne currently. While nickel may be on the electric vehicle (EV) investment grid because of its use in lithium-ion batteries, an old driver is reasserting itself – namely the state of the stainless steel market.
Demand for stainless steel, which accounts for most of the world’s nickel usage, has been “depressing” everywhere but China, analysts at JP Morgan said. (“Metals Quarterly”, Nov. 22, 2019)
The bank is forecasting that stainless steel production in the rest of the world will fall 1.7 million tonnes this year, a contraction of 7% and the sharpest year-on-year decline since 2009.