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Morgan Stanley sees weak medium-term nickel prices


Global nickel markets will likely stay weak over the next few years as demand remains low and oversupply continues, Morgan Stanley chief metals economist Peter Richardson said Wednesday.

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Richardson, speaking at a conference, forecast nickel prices would average $6.51/lb in 2014, $7.15/lb in 2015 and $7.50/lb in 2016. Nickel prices are currently around $6.60/lb.

Conditions remained lackluster in the stainless steel sector -- which accounts for 65% of nickel off take -- in China and Europe with both regions plagued by overcapacity. Despite an improved industrial sector in Europe, demand remained slow and producers were already looking to H1 2014 as Q4 order books remained light, Richardson said.

Europe had taken a long time to restructure and nickel and charge chrome's lower prices had discouraged mill alloy re-stocking, while rising refined stocks and market surpluses suggested there were near term risks, he said.

"Weak demand has converged with rising supply of Frankel and refined metal, resulting in a large and rising market surplus," he said.

Challenges also remained before a nickel price recovery could occur and this included China's increase in nickel pig iron (NPI) production. Richardson said in 2006 China produced 38,000 mt of NPI but was expected to produce 420,000 mt this year.

Other pressures outside of China included advances with acid leaching technology and new supply coming onto the market, which could add a further 275,000 mt to the market by 2017.

The nickel market will be hampered further if Indonesia introduced an export ban on unprocessed nickel ore in H1 2014. Richardson said there was already evidence that China was stockpiling material, which meant stocks would stay high in the near term, weakening prices.

--Marnie Hobson,
--Edited by Dan Lalor,