Fitch Solutions Macro Research has revised its nickel price forecast for this year down to $13 250/t, compared with its previous forecast of $14 500/t, as prices have headed lower in recent weeks.
The nickel price has dropped by 9% to $12 010/t in mid-May, compared with $13 100 in mid-April.
The consultancy says the lower nickel price is the result of rising global economic risks, an escalation in the US–China trade dispute and “disappointing” year-to-date demand for refined nickel from China’s steel production industry.
Fitch reports that while China’s manufacturing purchasing managers index increased to 50.8 in March, it retreated back to 50.2 in April, sowing market doubts over whether government’s stimulus will be sufficient to kickstart growth in the domestic economy.
Meanwhile, the US–China trade dispute seemingly came close to terms on a deal that would de-escalate heightened trade tensions; however, President Donald Trump had since raised tariffs from 10% to 25% on $200-billion worth of Chinese goods.
“These rising trade barriers will accentuate concerns about the health of the global economy, leading to downward pressure on metals.”
As an added headwind, Chinese demand for refined nickel has declined on the back of the steel production in China declining by 3.9% year-on-year over the first two months of the year, which resulted in a 30% year-on-year drop in refined nickel imports into China over the first three months of the year.
According to Fitch, this indicates that domestic consumption of stainless steel has not yet responded to government’s stimulus measures, which were announced towards the end of last year.
Ultimately, Fitch expects prices to witness some upside over the second half of the year as the Chinese government continues to provide economic support for its domestic industries, although the company continues to flag downside risks from weakness in global economic growth and a potential worsening of the ongoing US-China trade dispute.
Fitch predicts that nickel prices will remain on a gradual uptrend between 2019 and 2023, as the global market remains in a deficit or in balance over the coming years.
The company adds that other major nickel-consuming markets such as South Korea and India will also provide an upside to demand owing to strong average vehicle production growth of 9.1% and 11.4%, respectively, anticipated over the next ten years.
The growing electric vehicle market will also support copper demand, as manufacturers begin to use higher nickel content batteries in their vehicles.