Inco buying nickel to meet costumer demand
MI WEEK IN REVIEW: Nickel keeps flying…another week, another high
Metals Insider - 12 March 2007
MI WEEK IN REVIEW: Nickel’s performance last week was proof of the old adage: “You can’t keep a good thing down”. After belatedly reacting on Monday to the risk-reduction storm that broke over just about every other global financial market, LME nickel bounced back strongly and was notching up fresh all-time nominal highs by the time the week was out.
Back with a Vengeance
In this item last week, we noted LME nickel’s remarkable insouciance to the global market shake-out that had spread from the slump in the Chinese equity market through other stock markets and the currency markets before its effects washed over the industrial metals.
Monday it was catch-up day and 3-month nickel fell sharply back through the $40,000t level to a low of $39,100. The close at $39,300 marked a day-to-day loss of $1,800 but anyone hoping for further weakness, or even some long overdue consolidatory price action, was in for disappointment.
Amid recovering equity markets and signs that the global risk-reduction exercise was coming to an end (for now at least), nickel simply powered back upwards Tuesday and Wednesday to recoup all of its losses by that day’s close at $42,000.
With copper picking up its own head of upside steam Thursday, nickel punched up to a fresh all-time high of $43,261 and closed the day out valued at $42,850—also a new all-time high on a closing basis.
Friday brought the inevitable profit-taking exercise across all of the LME metals but a weekly close at $42,400 was a week-to-week gain of $1,300—the fourth consecutive “up” week--and left 3-month metal showing a year-to-date gain of 27%.
Trading conditions, it must be stressed, continued to be ultra-volatile and part of the nickel story is down to a lack of sell-side liquidity—understandable since the cash-3s backwardation is still measured in four figures--$2,650 as at Friday’s close.
The market’s bull credentials were on full show, when CVRD-Inco and Xstrata unveiled their Q4 financials and accompanying statements.
Here’s some key sound-bites from Fabio Barbosa, chief financial officer of CVRD, speaking to analysts on a conference call: “We don’t see any room for stock replenishment this year…stainless steel production is growing everywhere,…demand is not waiting for new supply to come to the market…nickel should remain tight for some years down the road.”
And here’s some tasters of what Xstrata had to say about nickel: “The market will not be able to accommodate a deficit and cannot sustain global nickel demand growth in excess of 4% year-on-year…a number of major producers (are) sold out and LME inventories (are) at critically low levels”.
Producer hype? Not when CVRD-Inco admitted it spent $482m in the last two months of last year to buy 14,600t of nickel just to meet customer demand. And that with quarterly production in the fourth quarter of 2006!