After slumping more than any other industrial metal, analysts and traders say the worst may be over for nickel as restrictions on shipments from Indonesia, the biggest producer, diminish a worldwide glut.
Indonesia banned some ore exports from May 6 and imposed a 20 percent tax on the remainder to spur the development of its refining industry. The nation’s output will drop for the first time in four years in 2013, slashing global supply growth to 0.2 percent, from 4.9 percent in 2012, Morgan Stanley estimates. Prices will average $20,000 a metric ton in the fourth quarter, an increase of 23 percent, the median of 16 analyst estimates compiled by Bloomberg shows.
The metal fell 13 percent this year on prospects for the biggest surplus since 2009. Morgan Stanley now predicts the glut will peak in 2012 and Barclays Plc says prices should rally toward the end of the year on strengthening demand from stainless-steel makers, the biggest consumers. The rebound may not happen until then as China runs down record ore stockpiles accumulated in anticipation of the Indonesian ban.
“The most bullish thing for nickel short-term is the impact of the ban on exports,” said David Wilson, an analyst at Citigroup Inc. in London and a former economist for OAO GMK Norilsk Nickel, the biggest producer of the metal. “We estimate China has enough stockpiles for about two-to-three months of consumption. There is a double-whammy impact there. There is less ore and it’s going to be more expensive.”
Nickel extended its drop this week and was 13 percent lower for the year at $16,230 on the London Metal Exchange. The LMEX index of six industrial metals was down 2.7 percent and the Standard & Poor’s GSCI gauge of 24 commodities fell 6.9 percent. The MSCI All-Country World Index of equities declined 0.4 percent and Treasuries returned 1.8 percent, a Bank of America Corp. index (MXWD) shows.
The glut will contract to 36,900 tons next year, equal to a week of demand, from 46,600 tons in 2012, Morgan Stanley said in a March report. Prices rallied 58 percent in 2009 as the surplus declined to 98,200 tons from 100,300 tons.
The bank’s analysts also expect record consumption every year until at least 2017. Output of stainless steel, accounting for 69 percent of nickel usage, will expand to an all-time high in 2012, according to MEPS (International) Ltd., a consultant to the industry.
Indonesia banned exports of 21 unprocessed minerals, except for companies planning to build local refineries. Those shipments are subject to a 20 percent tax. National exports of nickel ore may drop as much as 20 percent in the second half, Sukristiyawan, the senior marketing manager of PT Aneka Tambang, the country’s second-largest producer, said in an interview this month.
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