Nickel Market: Lopez's ouster prompts sell-off

This article is an extract of the monthly Commodity Briefing Service for Nickel which examines global nickel market trends over the past month.

By Louise Gammon and Sanjay Saraf | 19 May 2017

S&P Global Market Intelligence has announced significant adjustments to its nickel supply and demand forecasts based on expectations of a looser supply picture emerging over the months ahead.

We now expect global mined nickel output to total 2.13 Mt this year, from our previous forecast of 2.09 Mt, and we expect global refined nickel output to reach 2.05 Mt, from our previous forecast of 1.95 Mt. As such, we anticipate a smaller market deficit this year of 59,000 tonnes, rather than the 78,000 tonnes that we were previously expecting.

The LME three-month nickel price is expected to average US$9,765/t this year, compared with our previous forecast of US$10,781/t. Recent market action and increased downside risks have tempered our forward view.

Nickel prices have moved sharply lower over the past month as the risk premium that had been gradually baked into prices, due to the environmental crackdown taking place in the Philippines, has begun to dissolve.

On May 3, keen environmentalist Regina Lopez was ousted from her position as minister for environment and natural resources. Within a year of taking office, Lopez had audited the Philippine mining industry, potentially threatening to curtail almost half of the country's nickel ore output. The newly appointed minister for the environment, Roy Cimatu, has signaled that his position toward the mining industry is likely to be more favorable.

The prospect of limited disruptions to Philippine ore exports, combined with greater volumes of ore exported from Indonesia in the wake of the country's relaxation of its ban on the export of unrefined minerals, creates a much looser supply picture. Greater ore availability could spur higher nickel pig iron production in China, keeping the Chinese stainless steel industry better-supplied with cheap feed.

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Nickel Market: Lopez's ouster prompts sell-off

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