Nickel premiums in Europe could see a recovery early next year say some traders and producers who expect recently eased bank reserve requirements in China to help spur demand for raw materials.
"The Chinese government has just eased the lending regulations for its banks so we could see a bit of a pick-up in January if we stay at these levels," a source at a nickel producer said.
Last month, for the first time in three years, China's central bank cut reserve requirements for commercial lenders, shifting policy to ease credit and shore up the economy.
Spot nickel is currently seeing support from some buying from Chinese stainless steel mills, the country's top nickel users, as nickel pig iron (NPI) producers struggle to compete in the wake of the refined metal's recent falls.
Premiums for cut NI-RDM-CT and briquette NI-RDM-BRQ nickel in Rotterdam, paid over the LME cash price, were both quoted at $250-300 a tonne, largely unchanged from previous weeks, while fullplate NI-RDM-FP was quoted slightly higher at $100-125.
Premiums for base metals have come under pressure in recent months as uncertainty about Europe's economic growth and its knock-on effect on the global economy has raised fears about the demand outlook.
"We expect to see fairly strong Chinese buying as we go through the year and it (China's move to lower bank requirement ratios) should help ease the situation," a physical nickel trader said.
Three-month nickel on the London Metal Exchange hit a 23-month low of $16,550 in late November. It is down almost 26 percent year to date, making it the worst performer in the base metal complex after tin.
On Wednesday it traded at $17,775 a tonne.
"Nickel at $18,000 a tonne is quite a low number for a lot of nickel pig iron producers in China (to compete with) so there is some support coming from there," the industry source said.
"But at the same time, some of the producers are using higher technology so they have a lower cost price."
China's imports of refined nickel and alloy in the first 10 months of the year at 179,518 tonnes were up 15.64 percent on the year.
"There is a whole spectrum of different forms of nickel, with a large amount of scrap and stainless steel scrap in the middle, which people will be shifting through as they're getting closer to refined nickel," said Nic Brown, head of commodity research at Natixis.
"We're not at all surprised that nickel has bounced around this ($18,000 a tonne) level and appears to be experiencing some support around these levels."
Reuters |
