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Nickel premiums stagnant amid oversupply

Keywords: Tags  nickel prices, nickel premiums, London Metal Exchange, LME, Natixis, Nickel Study Group, China, nickel pig iron NPI

NEW YORK — Nickel spot market trading activity has continued to stagnate, traders said, as global oversupply and uncertainty surrounding the future of China’s nickel pig iron (NPI) industry has hindered worldwide market outlook.

AMM’s melting-grade premium remains at a range of 15 to 25 cents per pound, while the plating-grade premium held steady at 50 to 60 cents per pound.

The London Metal Exchange’s three-month nickel contract closed at $13,805 per tonne ($6.26 per pound) Oct. 9, up 0.2 percent from $13,775 per tonne ($6.25 per pound) Sept. 25.

Nickel stocks in LME-registered warehouses reamin high, reflecting the oversupply in the market, with inventories reaching a record high of 229,230 tonnes Oct. 8, before dipping to 228,996 tonnes Oct. 9.

Traders reported very little spot trading activity in the market, with several saying it had been weeks since they had moved nickel cathode supplies.

Analysts said global oversupply of material is at the root of weak market conditions. The International Nickel Study Group said this week that global nickel production is expected to increase 3.1 percent in 2014, and that demand for material was "disappointing" outside of China and India (, Oct. 9).

Uncertainty surrounding the nature of Indonesia’s ore export ban, expected to take effect next year, also looks to further influence the market. In its "Metals Review" for the second half of 2013, Paris-based investment bank Natixis SA said that if the export ban "were to result in a sharp drop in Indonesian exports of low-grade nickel ore to China, then a significant fall in Chinese NPI output could raise demand for refined nickel."

However, one large German bank told clients last week that the probability of the export ban becoming a "disruptive" market influence was looking "less likely," adding that an industry "relief valve" would have to come from further cuts in production.

In its October base metals report, Metal Bulletin Research said while "the strict imposition of a ban would significantly reign in Chinese NPI output and quickly improve prospects and prices for international producers," the terms of the Indonesian legislation could "prove to be soft enough that China’s NPI industry can carry on regardless."

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