The Hindu Business Line : Nickel cathode prices crash on fall in demand

NICKEL cathode prices in the domestic market have fallen by 10 per cent ( Rs 95 per kg) in the last one month. It was quoted at Rs 730 per kg on Wednesday as against Rs 825 per kg quoted on July 7. The decline is due to reduced domestic demand from stainless steel industry coupled with weak London metals market.

On the London Metal Exchange (LME), nickel prices were down 15 per cent ( $2,385) a tonne at $13,595 a tonne on Tuesday from $15,980 a tonne on July 7 on continued fund selling and increased warehouse stocks. Warehouse stock at LME was increased to 8,558 tonnes on Tuesday from 7,956 tonnes on July 7, up by 7.50 per cent.

"Domestic demand from stainless steel sector was limited in last two months," an importer said.

"Sharp falls in Chinese imports of refined nickel, de-stocking and higher world production had brought down the price by about 15 per cent in just one month. However, price fall in the domestic market is not much sharper than world market," an analyst said.

Although the nickel scrap market remains tight, falling prices have attracted some secondary material to the market.

According to industry consultant, Brook Hunt, this means the western world scrap ratio is likely to rise from 42 per cent to 44 per cent this year, removing some 20,000 tonnes from the demand side in the refined market.

"We expect prices to rise again in H2 of 2004 as a result of sheer inventory shortages and a structural supply shortfall," according to "The Commodity Refiner" report (June/July) released by Barclays Capital Research.

There are now signs that sharp falls in Chinese imports of refined nickel are bottoming out. Despite news of smaller stainless steel plants closing in China in response to measures against overcapacity, large projects are still proceeding, which will require large intakes of nickel. Chinese nickel demand outside the stainless steel sector is also rising, the report said.

"We expect demand from the battery sector to rise by over 30 per cent this year to about 16,000 tonnes, although this partly reflects a shift in production from Japan," the report added.

The International Stainless Steel Forum suggests global melt output will rise 6.8 per cent this year. Japanese melt production is strong, up 4 per cent to 1.07 million tonnes (mt) in the first quarter.

In 2004, global production of refined nickel is forecast to increase to 1.30 mt as against 1.21 mt in 2003, up by 7 per cent. Global consumption is also expected to rise to 1.32 mt in 2004 as against 1.26 mt in 2003, up by 4.7 per cent.

With regard to the expected market balance in 2004, usage will continue to exceed production. However, the stock draw down in 2004 will be smaller than it was in 2003, according to the International Nickel Study Group INSG).