Quantcast
Other Stories
Gold
(2015-04-03)
29240(0) (LTP)
Gold
(2015-04-03)
29240(0) (LTP)
Gold
(2014-09-26)
25626(0) (LTP)
Gold
(2014-09-26)
25626(0) (LTP)
23 Apr 2014
28487 Pivot
23 Apr 2014
42082 Pivot

The rapid growth in lower-cost, higher-quality supply from RKEF(Rotary Kiln-Electric Furnace) means the NPI sector is now the main supplier of nickel to the stainless market. As the share of RKEF in NPI grows, this sh..

01 Feb 2013

LONDON (Commodity Online): The refined nickel market is heading for surplus again in 2013. Price-sensitive Nickel Pig Iron is the market’s swing supply and makes up most of the top quartile of the global industry cost curve, so will likely be the deciding factor of where prices will need to trade to trigger supply rationing. With LME prices currently trading at the upper end of the cost curve, Barlcays favour shorting nickel.

The rapid growth in lower-cost, higher-quality supply from RKEF(Rotary Kiln-Electric Furnace) means the NPI sector is now the main supplier of nickel to the stainless market. As the share of RKEF in NPI grows, this should drive global industry costs lower and, in turn, support the argument for nickel prices to fall, given Barclays' forecast surplus.

“Our analysis shows that such is the scale of new, mainly RKEF, NPI production that it could largely offset potential supply losses elsewhere. As much as 170Kt of ni-contained NPI capacity will ramp up in 2013, which more than outweighs the 78Kt of nickel production expected from key HPAL and ferronickel mine projects.” the Bank said.

Where nickel prices should trade will, in Barclay's view, be determined by Chinese stainless steel demand and the cost of producing the marginal tonne of NPI needed to meet that demand. Whilst the relationship is certainly not perfect, with other sources of nickel units creating competitive pressures at times, we see this as the overall best guide.

We expect a level of Chinese stainless activity in 2013 that will necessitate nickel prices trading between average and marginal NPI production costs, which points towards LME nickel prices of $15,500-18,000/t.

Any extension beyond the range, based on the current fundamental outlook, offers an opportunity for investors and corporates to take advantage.

The risk is that RKEF’s raw material needs are such that it requires substantially more and higher-quality nickel ore than other types of NPI. Given constraints on high-quality lateritic ore supply, potentially reinforced by an export ban from Indonesia in 2014, this could provide a source of cost inflation for the sector.


YOUR RESPONSE
Click on the image to reload it
Click to reload image
COMMENTS (0)

@2013 COMMODITYONLINE ALL RIGHTS RESERVED