2017 not so good for nickel: BMI

“We believe market sentiment is overly bullish compared with fundamentals, as we forecast the nickel market to loosen in 2017,” reads BMI Research’s latest report on the metal.

According to the firm, refined nickel prices will trade in the $10,000-11,000/tonne range in the next three months, due to temporary market deficit of 3.1 thousand tonnes driven by mine closures in the Philippines and eroded global stockpiles caused high Chinese imports.

In this context, analysts say, positive investor sentiment could even send nickel prices up to $12,000-13,000/tonne.

Nevertheless, BMI predicts that as soon as the new year kicks off, dollar figures will start to moderately decline as the global market moves into 27.2 thousand tonnes surplus.

“China's consumption, in particular, will be weaker in 2017 for two main reasons. Firstly, the availability of a cheaper substitute, nickel pig iron, from smelters in Indonesia coming online will reduce Chinese demand for more expensive refined nickel. Secondly, we expect the effects of the housing stimulus to lose steam by the end of 2017, slowing overall steel production, and nickel demand, back to previous lows,” the study says.

The situation in Indonesia, where there’s an ore export ban in place since 2014 but there has been some back and forth on whether to relax it or not, could also have an impact on both supply and prices. “Should Indonesia relax or completely remove its current ban on mineral exports, this would give a boost to global nickel supply and be a net negative to refined prices. A windfall of high-quality feedstock would enable Chinese refined nickel smelters, not just NPI smelters, to maintain production at higher levels than would otherwise have been the case,” BMI states.

The fall in prices due to oversupply won’t be a sharp one, though, because a more positive sentiment towards industrial metals would put a floor on prices in 2017.