Prices dropped as much as 18% from May, declining last month for the first back-to-back retreat in a year. The volume of stockpiles will probably limit gains in prices until the market starts to move into deficit, possibly from 2015, according to Melbourne-based National Australia Bank Ltd.
Users in China are already looking to replace lost supply. Ore imports from the Philippines were 53% of total purchases in the first half, from 35% a year earlier, customs data show. China’s imports reached a record 7.82 million tons in November as users secured supply before the ban.
Processing capacity is being built in Indonesia and there will eventually be a large smelting industry in the country, Goldman Sachs said in a July 23 report. Local output of nickel pig iron, tracked in refined-metal terms, will rise from 1,000 tons this year to 46,000 tons in 2015, Morgan Stanley said.
Indonesian President Susilo Bambang Yudhoyono banned raw mineral ore exports in January to boost local processing and has given no signs that the curb will be relaxed as companies start to construct plants across the Asian archipelago. Joko Widodo, the Jakarta governor who was elected last month to succeed Yudhoyono isn’t likely to ease the ban, Briggs, the BNP strategist, said in an interview.
Ore stockpiles built up by makers of nickel pig iron in China will be exhausted next quarter, according to Australia & New Zealand Banking Group Ltd., which said Philippine supply won’t be enough to fill the void. Producers in China are running at 59% of capacity this month, down from 67% in April, according to Beijing Antaike Information Development Co., a state-backed researcher. Nickel pig iron output in China will drop 45% to 212,000 tons in 2015, Morgan Stanley says.
Global stainless-steel production is set to climb 5.7% to a record 40.2 million tons this year, MEPS (International) Ltd. said July 31. Output in China, the biggest producer, may rise 6.4% to 20.2 million tons, it said. The U.S., Europe and Japan will also add to supply, the Sheffield, U.K.-based consultant estimates.
Prices are still too low given the market is set to shift to a deficit and the metal should trade at $20,000 to $25,000 so unprofitable producers break even, according to Anton Berlin, head of strategic marketing at Moscow-based Norilsk.
Nickel may climb 9.7% to average $19,346 a ton next year, Morgan Stanley estimates. Goldman Sachs’ 2015 forecast of $22,000 a ton would be the highest average price since 2011, and the New York-based bank said as much as $30,000 is possible should there be no relaxation of Indonesia’s curb.
“We saw the Indonesian ban as an opportunity for the nickel market,” said Avebury’s Daws. “The ability to turn on supply is limited and continues to be that way in a growing demand environment for stainless steel.”
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