Commodities | Aug 13 2024
A glance through the latest expert views and predictions about commodities: nickel prices nearing a floor; opportunities in copper & Macquarie's gold sector preferences.
-Has the bottom been reached for nickel prices?
-Copper price retracement creates opportunities
-Morgans' gold sector preferences
By Mark Woodruff
Is the bottom in for the nickel price?
The nadir for nickel pricing may be approaching, exclaims Morgan Stanley, with the broker's year end price target of US$16,000/t already been met.
Despite potential for short-term rallies as a lot of bad news has already been priced into the market, elevated nickel inventories and a challenging demand environment limit the sustainability of any nickel price rally, in the broker's view.
Global nickel exchange inventories have surged 67% so far in 2024, reaching the highest levels since November 2021.
At the same time, the analysts also see limited further downside to nickel pricing after a pullback in prices to around the 70th percentile of the cost curve, a level where nickel has historically found support.
Morgan Stanley concludes pricing might remain range bound for the time being, noting the current nickel price is now back close to lows for 2024, after a brief rally back above US$$21,000/t.
Weighing on the nickel price, lithium iron phosphate (LFP) batteries continue to gain market share, explains the broker, causing the share of nickel-bearing batteries in global deployment to fall to 53.6% in June, the lowest since April 2018.
While stainless steel still accounts for around 70% of global nickel demand, the mantle of key growth driver has passed to batteries, explains Morgan Stanley, which currently account for around 16% of nickel demand.
China's output of stainless steel has been robust so far, yet elevated inventories are likely to create an overhang going forward. Morgan Stanley also sees downside to European stainless steel output.
Low nickel prices are triggering supply responses such as BHP Group's ((BHP)) suspension of its Nickel West division in July, while ongoing production challenges in New Caledonia and weather impacts in Indonesia are tightening up supply, bringing downside risks to projected surpluses for 2024 and 2025.
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