Global Nickel market in firm oversupply, production cuts needed: Macquarie
NEW YORK (Scrap Register): The global nickel market remains in oversupply with significant production cutbacks required to rebalance fundamentals, said Macquarie, a Sydney based investment bank, in a research note.
Nickel prices have seen a sharp fall in the past week as part of the broader commodity selloff and stocks on the London Metal Exchange currently stand at historically high levels.
According to the latest data from the International Nickel Study Group, the market has been in a sustained surplus since 2011.
Macquarie noted that despite the surplus, nickel prices have lost their typical relationship to stocks, with prices today higher than they were in August 2012, when stocks were 50,000 mt lower.
However, the bank said that a sharp fall in the nickel price and rising open interest implies that large shorts have been put in place over the past month.
"The weakness in the nickel market is due to weak stainless steel production outside China -- production is estimated to have fallen year-on-year in Japan, Europe, Korea and Taiwan in the first three months of 2013," Macquarie added.
Primary nickel has also suffered from an increase in the amount of secondary nickel being used in the European stainless steel industry.