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Nickel premiums fall to multiyear lows

Keywords: Tags  nickel premiums, melting grade, plating grade, Thorsten Schier

NEW YORK — Nickel premiums have fallen to multiyear lows as supply continues to outweigh demand.

Premiums for melting-grade material have fallen to between 20 and 25 cents per pound, a range not seen since December 2003, while plating grade is at 50 to 60 cents per pound, the lowest range since August 2009.

"There’s a lot of competition on the business . . . and I don’t see that changing in the future. To me, it’s because business is slow in Europe and suppliers are trying to unload material over here," according to one trader.

"The European stainless market is rubbish and China doesn’t look that great. The U.S. is a bright spot, but then it’s also not that bright," an analyst said, adding that continuously falling nickel prices on the London Metal Exchange are "putting (stainless) distributors off from restocking,"

The spot market hasn’t been overly active, a situation unchanged from earlier in the year.

"There hasn’t been a whole lot of action, and now we’re heading into the summer months," a second trader said.

Stainless mills, most of which are locked up in long-term contracts for most of their requirements, are said to be taking less material. Meanwhile, quantities sold to foundries, which have made up the bulk of this year’s spot business, remain unchanged, sources said.

Recent low nickel prices have led some consumers to show more interest, although purchasing hasn’t increased significantly.

Sources were puzzled by the continuously falling nickel price on the LME, with the three-month contract ending the official session at $17,225 per tonne ($7.81 per pound) Thursday, up 0.9 percent from $17,075 per tonne a day earlier but 3.8 percent below the $17,910 per tonne level seen at the start of April.

"I can’t imagine the price will go any lower, although I said that when the price was $1 (per pound) higher," according to a third trader.

The price fall comes as Chinese nickel pig iron (NPI) producers, whose output costs of around $18,000 per tonne have been cited as a natural floor for nickel prices, are also benefitting from lower LME tags.

"The nickel ore price is falling in conjunction with the LME price, which is lowering their (NPI producers’) costs," the analyst said, adding that while some producers might have already shut down due to low prices, demand hasn’t been robust enough to force stainless mills to buy virgin nickel and drive prices higher.

A recent export ban on nickel ore from Indonesia might provide some upside in the second half of the year, but the pricing picture looks grim in the short term.

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