Strong price rally as stock levels largely maintained
December 2017
The average LME nickel price in November increased 6% month on month to US$12,016/t (US$5.45/lb), the highest monthly average since June 2015. The nickel price peaked in early November at US$12,870/t (US$5.84/lb), after climbing dramatically from US$10,304/t (US$4.67/lb) at the start of October, before declining over the month to around US$11,300/t (US$5.13/lb).

The high prices seen early in the month were driven by positive market sentiment across base metals and the perception that electric vehicles (EV) would drive significant demand. Prices cooled off as the reality that any significant impact on nickel demand by EVs was several years away, and the potential for slowing demand from China’s stainless-steel sector going into winter, with stainless steel responsible for two thirds of global demand.

Over November, combined exchange stocks (LME and SHFE) drew down by 7.1kt to 423.5k, with reductions in stock levels seen in both LME and the SHFE warehouses. LME stocks remained relatively stable, moving in the range of 379-384kt, and a total reduction of 1.8kt over the month equal to less than half a percent of total LME stocks. SHFE stocks fell 5.3kt to 43.4kt; for a drop of almost 11% on that exchange, and just 39% of the peak SHFE stocks reached in August of last year.

Over November, imported nickel laterite ore stocks stored at Chinese ports fell 6%, or 0.65Mt to reach 10.1Mt, as stocks began to decline from their annual October peak as shipments from the major Philippine producers in the Surigao region drop off as the rainy season sets in. Medium to high-grade stocks fell by 7%, or 0.54Mt, to 6.9Mt while low-grade stocks fell by only 3% to 3.16Mt. This reflects increased contributions from Philippine low-grade producers before the shipping window ahead of the rainy season closes, even while higher-grade feed from Indonesia is increasing. AME estimates that Chinese port stocks currently hold around 92kt of contained nickel, down 6kt over the month. Compared to November last year, China’s overall port stocks have fallen by 5.15Mt, or 46kt of contained nickel, port stocks will be exhausted in two years if drawdown continues at current rates.