The Hindu Business Line : Dull domestic demand caps nickel gains

WORLD prices of nickel recovered by 12 per cent in November on continued buying support from Asian buyers despite continued increase in LME (London Metal Exchange) warehouse stocks.

At the London Metal Exchange, nickel prices were ruling higher at $12,650 a tonne on Wednesday from $11,575 at the beginning of the month, up nearly 10 per cent, while domestic prices moved up by Rs 30 a kg (5 per cent) to Rs 701 at the Bombay Metals Exchange. Prices touched an all-time high of Rs 850 a kg on May 13.

Domestic prices normally move in line with the world market; world prices declined by about 22 per cent in the past six months.

"Nickel's movement could be influenced by copper price trends," said Mr Jashubhai Mehta of M/s T.G. Metal Industries, a base metal importing firm. Copper has been moving up to record highs on reports of a rumoured short position in China.

Nickel prices are expected to remain moderately firm in the near-term trading at $10,000-15,000 a tonne.

They have been quite volatile in daily trading, a trader said.

Warehouse stocks at LME increased sharply at 22,332 tonnes as on Tuesday from 9,510 tonnes in end-August.

Nickel's price movements have a direct bearing on the fortunes of the stainless steel industry.

The nickel and stainless markets are widely influenced by demand from the Chinese markets.

"Two-thirds of the nickel production is used by the stainless steel industry," said Mr Arvind Parakh, Director - Finance, Jindal Stainless Ltd. The upturn in nickel prices does hurt the margins of the stainless steel industry.

Of the total production of 1.4 million tonnes of nickel, India imports 50,000 tonnes. Stainless steel production in India increased by 10 per cent in the first half of this year from the same time last year, according to The International Stainless Steel Forum.

According to Mr Parakh, the world's consumption of nickel is edging down primarily because the use of the 300 series of stainless steel is coming down.

The 300 series of stainless steel consumes 8-16 per cent of nickel.

"The share of 300 series of stainless steel is declining, while that of chrome manganese stainless steel, which uses up to four per cent of nickel, is gaining importance. The 300 series share has dipped to 65 per cent from 75 per cent," Mr Parakh said.

"Domestic prices were down continuously in the past few months on dull demand, but they have recovered partly on some buying at the lower level. Local demand for stainless steel products is dull especially after Diwali.

Offtake of SS sheet and pipes was also low," a local stainless steel trader said.

The easing of nickel deficit could see prices of the metal edging down.

Recent statistics show that despite the strong Chinese economy, global stainless steel growth has slowed down from 7.8 per cent last year to 5.7 per cent this year.

With stainless steel growth slowing, the demand for nickel has also eased.

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