Market Briefing - September 4, 2009

Having climbed to $21,070/tonne on August 13 – the highest price level in a year – the nickel cash quote fell by $2,095 in the subsequent two days before picking up and stabilising at around $19,500/tonne for the rest of the month. The nickel market has displayed its typical volatility in recent months. Importantly, the August monthly cash average at $19,642/tonne increased by 23% on July. The higher prices were, in part, also driven by encouraging economic data and the strike at Vale’s Canadian operations, as well as by the sector-wide buying by investment funds.

However, given the more than doubling of the price, nickel certainly comes into the category of having got well ahead of the fundamentals. Nevertheless, prices in early September have started on a weaker note (touching a one month low of $17,900/tonne on September 2), to some extent reflecting the recently rapid pickup in LME stocks, although in general, these have been on an upward trend since the start of August. LME inventories are currently at 116,640 tonnes on September 4, around 10,000 tonnes up from the beginning of August.

Stainless steel industry is improving
Stainless steel production, which represents almost two-thirds of nickel demand, has been picking up since the start of Q2. As highlighted in previous reports, output from a number of mills has been increasing. Higher alloy surcharges, triggered by the higher nickel price on the LME, has also encouraged the restocking process. We understand that the availability of in-house scrap remains tight, which in theory means stainless mills are boosting the amount of primary nickel in their melts. Below, we highlight some stainless activity that has taken place in the past month or so.

> This article gives the introduction to our latest detailed analysis on the market. To access a full version of a recent detailed monthly report on the base metals markets plus a recent briefing update, click on the links below.

> Base Metals Market Briefing - December 9, 2008.

> Base Metals Market Briefing Update - December 16, 2008.

Disclaimer: Whilst every effort has been made to ensure the accuracy of the information used in this document, GFMS Metals Consulting cannot guarantee such accuracy and GFMS Metals Consulting does not accept responsibility for any losses or damages arising directly, or indirectly, from the use of this information.