Nickel stocks rise on low stainless demand: Eramet

Uncertainty remains regarding the nickel supply and demand balance, says French miner Eramet in its first-quarter financial report monitored by Kallanish. The spread of Covid-19 is currently reflected by reduced demand and supply of nickel with contrasts in the scale of the reductions. Some ore and metal producing countries’ activities have been adversely affected.

Due to the downturn in the automotive sector and the health crisis in Asia, global stainless steel production, which is the main end-market for nickel, contracted sharply versus Q1 2019 by -12.1% quarter-on-quarter. This change was observed in both China which contracted by -6.0% and the rest of the world, -18.8%, specifically in Indonesia that saw a -9.8% decline. Demand for primary nickel was down -13.5% but primary nickel production increased in Q1 compared with last year by 2.9%, propelled by a 15.2% y-o-y growth in nickel pig iron production driven by Indonesia in the context of the ban effective since 1 January.

The nickel supply/demand balance is now in surplus resulting in an increase in stocks at the London Metal Exchange LME and Shanghai Futures Exchange SHFE at end-March 2020. Stocks totalled more than 250,000 tonnes, or 35% higher than at the end of 2019 representing approximately 10 weeks’ consumption.

The average LME price was $5.8/lb in Q1 2020, up 2.7% on prices in Q1 2019 but down -17.2% versus Q4 2019, the miner says.

In New Caledonia, the implementation of Société le Nickel’s (SLN) new business model remained successful in the first quarter. Mining production delivered a record first-quarter performance, ending at 918,000 wet metric tons, up by 5%.