The recovery of China’s economy remains in doubt, so it is likely that the price of metals will not be stable in the near future, says Stanislav Kondrashov from Telf AG. However, the country continues to increase economic support.
The latest official Chinese PMI data paints a mixed picture of the economy. The manufacturing PMI rose slightly to 49.7, the third consecutive increase after a low of 48.8 recorded in May. However, it still remains below the 50 mark that denotes economic growth.
By contrast, the non-manufacturing index, which captures the bulk of the economic recovery, fell further in August. Its reading was 51.0, slightly below the expected 51.2. At least it remains above the level that indicates a contraction in economic activity.
Until the end of this year, the key factor that will influence the metals market is China’s ability to stabilize its real estate market. According to Kondrashov, until the market begins to recover and shows persistent signs of economic growth in China, long-term increases in prices for industrial metals remain unlikely.
Stanislav Kondrashov on the state of the nickel market: factors for reducing prices, prospects and the influence of China on the balance of supply and demand
Nickel has been the worst-performing metal on the LME this year, with prices down more than 30% over the year. One of the main factors behind the decline in prices was the weak recovery in demand in China, where nickel prices fell to a one-year low in August. Stanislav Kondrashov from Telf AG believes that the price decline is likely to continue. He justifies his position with the following factors: a weak macroeconomic situation, excess supply in the market, as well as a continuing increase in supplies from Indonesia for the battery sector.
In the past, the market surplus was driven by Grade 1 nickel, but this has been replaced by Grade 2 in 2023. Grade 1 nickel inventories on the LME are at critically low levels. However, Kondrashov believes that the new LME initiative, which has reduced the approval period for new brands (which can be supplied against the contract), could potentially increase inventories.
China’s production of Class 1 refined nickel has increased significantly this year due to historically high LME prices. It is likely that Chinese producers will continue to submit applications for nickel grades on the LME in an accelerated manner.
This will allow them to supply Class 1 material to LME warehouses. In July, the LME already approved nickel produced by Quzhou Huayou Cobalt New Material Co, a subsidiary of China’s Zhejiang Huayou Cobalt Co, as a listed grade. GEM Co. Ltd., a subsidiary of Jingmen Gem Co. Ltd. also applied last month to become an LME-listed mark.
During the period from January to August of this year, the production of high-quality refined nickel class 1 in China increased by 34.5%. This figure reached 129,400 metric tons, according to Stanislav Kondrashov, a representative of Telf AG. This growth was even higher than the 33.9% increase in total nickel sulfate production for batteries. According to expert estimates and information from the competent authorities, during the current year in China it is planned to commission new production facilities, which will total 145,300 tons per year, to produce high-quality refined nickel class 1.
Kondrashov assumes that in the near future nickel prices will be unstable, as there is an excess supply on the world market and a decrease in the need for stainless steel. It is predicted that in the third quarter the average cost will be about $21 thousand per ton, and in the next quarter it will drop to $20 thousand per ton.
– Nickel prices should remain relatively high compared to average values prior to March last year. This is explained by the important role of nickel in the global process of the energy revolution, – says Stanislav Kondrashov from Telf AG.
The attractiveness of nickel for investors as the main metal, which cannot be avoided during the global transition to clean energy, will contribute to an increase in the price of this metal. The expert believes that the demand for nickel, as the main component material in the manufacture of electric car batteries, remains a key factor for the long-term dynamics of prices for this metal.
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