As the nickel industry struggles to recover from a downturn in its global market, uncertainties continue to surround its future.
The industry previously benefited from the once energetic boom in the Chinese market, where more nickel was consumed than any other metal. In fact, at one point, China’s consumption of the commodity exceeded the total utilisation of the rest of the world.
During a ‘rough’ 2012 however, manufacturing in China declined and the country’s consumption dropped to 46% of global nickel output at the end of last year. It has continued to fall, reaching 38% in July this year.
With further marked drops in demand - the likes of which have not been seen since the euro-zone crisis - it is clear to see why China’s ongoing macroeconomic conditions are causing the nickel industry some concern.
Decreasing demand could force nickel prices to hit a four-year low in a bid to shift stockpiles of nickel out of warehouses and into the market place.
So how will this all pan out?
Obviously the speed at which the Chinese economy continues to decline will directly impact on the demand and price of nickel. How this will be managed is uncertain.
What is certain is that prices that fall below the cost of production are not sustainable in the medium term. There has to be a turnaround, and when there is, it will result in a buyers’ market in which manufacturers will rush to find bargain prices, so they can stockpile ‘cheap’ nickel while they have the chance.
This scenario would boost chances of a rebound in nickel prices, and if the online predications from a spokesperson from Motilal Oswal Commodities Ltd ring true, we could expect nickel markets to turnaround in six months to a year.
We certainly hope this is the case, and like all those affected by the current situation, will continue to monitor the situation with much interest – and keep our fingers crossed.
