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Abstract According to a report from Mumbai on March 9, Indian media outlet BusinessLine highlighted that the global nickel market has faced a supply shortage in recent years. However, signs of oversupply are emerging this year due to a modest rise in production, while demand continues to grow. The report predicts a growing gap between supply and demand in the nickel market in 2015.
Global new mine output is increasing, and China’s nickel pig iron production remains on an upward trend, which is a key driver behind the rising nickel supply. In China, investment in low-cost nickel laterite smelting furnaces has surged, shifting the cost curve for nickel production and pushing prices down to the cost levels of many existing producers.
The sharp increase in nickel prices in 2007 led to long-term investment challenges for nickel producers around the world. The close link between the stainless steel industry and nickel consumption is well-known among market participants. Nickel pig iron is primarily used by Chinese stainless steel manufacturers, while laterite nickel ore mainly comes from Indonesia and the Philippines. However, Indonesia is also expanding its nickel pig iron smelting capacity, which could benefit producers globally by increasing the supply of nickel pig iron. This may signal a structural shift in the global stainless steel industry.
Such developments could allow stainless steel producers to boost output while potentially lowering costs. It is expected that oversupply will continue to pressure nickel prices until producers reduce nickel pig iron output or delay/abandon new projects.
According to the report, with increased nickel pig iron production capacity and new nickel ore output, the growth rate of total nickel supply between 2013 and 2015 is expected to be more moderate than in previous years. Meanwhile, global nickel demand remains robust, with the stainless steel industry accounting for one-third of total nickel usage. Analysts note that as the global economy gradually recovers, demand for stainless steel is also set to rise.
In particular, the Chinese government’s support for high-value-added products and improved energy efficiency is likely to drive higher stainless steel consumption. Indonesia, the world's largest nickel ore exporter, has failed to significantly boost nickel prices despite its ore export ban.
In the short term, downward pressure on nickel prices is still present. The average LME spot price for nickel is expected to be around $15,000 per ton over the next two quarters, with a volatility of approximately 5%. The biggest risk to nickel prices is the rapid expansion of nickel pig iron production in China. However, if Indonesia strictly enforces its nickel ore export ban, nickel ore exports could drop sharply, potentially pushing the nickel price up to $17,000 per ton.