The short-term horizontal trend of stainless steel metal nickel may start

Post Time: 2023-01-18

According to the news from foreign media on January 17, 2023, nickel prices continued to rebound throughout December. However, by January, the price began to have a slight correction, which may become the beginning of the short-term sideways trend. Before the price breaks through the new range, the market direction is still unclear. However, the market is still volatile. This is mainly because the total trading volume of LME exchange is low, leaving huge risks to the market.

01 Low-level license

Import licenses are still scarce.
Therefore, when the inventory surplus is solved, domestic steel mills in the United States may have quotas. Nevertheless, it will take several months for imports to catch up with demand.
In the first two weeks of January, the order volume of the service center was large. Mills also reported that the order intake was strong. At the same time, the alloy surcharge will be increased in February, which should stimulate the shipment volume.

02 Global nickel production may increase by 20%

A few months ago, the broker reportedly hesitated when Aoyama wanted to increase his short position. Now, the emerging report is detailing that the global nickel market may increase sharply due to the production led by Qingshan.

According to a recent Bloomberg report, Qingshan is negotiating with troubled Chinese copper producers on potential material conversion. Obviously, Qingshan hopes to take advantage of the high premium of refined nickel at present. If other countries adopt similar strategies, this will double China’s average annual output. Therefore, we may see the global total output increase by about 20%.

03 Future trend of nickel price

Of course, no one can guarantee that the transformation of output will occur or reach that degree. Analysts have predicted that nickel production will rise due to Indonesia’s increased efforts. This alone is enough to support the global surplus expectation in the coming years, and nickel price will also respond accordingly. At the same time, copper prices are currently rising. Although the market forecasts that there will be surplus in 2023, in the long run, the rising demand for copper will put pressure on this trend.

It is undeniable that Qingshan is a major market participant. In addition, last year’s attempt to increase short positions seemed to increase the credibility of these new reports. Of course, any significant increase in supply may pose significant pressure on nickel prices. Many people will remember that although other precious metals retreated significantly last year, low liquidity limited the decline of nickel prices. Since hitting the bottom in mid-July, the price has returned to a level higher than the pre-crisis high. This makes the time for market adjustment ripe, especially if the demand for stainless steel falls in 2023. This will also happen if the electric vehicle and energy transformation industries lose any momentum.

This story proves that even in a broken market, Qingshan is still a driving force. In fact, Xiang Everbright can still change the supply dynamics. Despite many disputes, the trading business is also more limited.

04 GCH plans to replace LME with nickel futures

At the same time, as LME’s nickel contract is still in a broken state, other companies are seeking to replace it. For example, Global Commodity Holding Company (GCH) will launch the physical nickel trading platform starting in late February. According to the company, the platform is intended to be a substitute for LME nickel futures contracts.

The nickel price squeeze in March last year caused a large number of investors to withdraw from LME’s nickel contracts, and made many people feel uneasy about the way LME handled the crisis, because the nickel price was seriously affected. Although the contract eventually survived, it was still plagued by low liquidity and the resulting volatility. So far, market makers have shown no interest in returning. However, only time can tell us whether dealers and investors are willing to take action or choose to completely withdraw from the nickel market.

Back in May, the Chicago Mercantile Exchange said it was exploring its own nickel contract. If one or both of them are formed in a meaningful way, it may mean that LME is becoming the best exchange for the price of physical contracts.