Rebound in Nickel prices to continue on supply disruption

Precious metal prices remained supported on the continued uncertainty over growth prospects and geopolitical tensions.

Gold prices rose 1.3 percent last week to $1359 per oz and Silver prices increased by 0.33 percent to $15.05 per oz.

Base metal complex continued to trade indecisive due to the pessimism around global growth and trade tensions, while some metals remained supported due to supply disruptions. Among the base metals complex, only Aluminum traded weak with 0.85 percent losses while all other metals closed 2 percent higher.

The energy complex closed the week with losses on account of a deepening trade war and higher inventories. Crude oil prices rallied on suspected attack on oil tankers but the uncertain demand outlook erased the gains while Nymex natural gas prices traded near lows due to record high production and no cooling demand in sight.

Nickel is the best performing base metal this year as at the London Metal Exchange it has risen by 10 percent this year.

Last week, Nickel prices witnessed some buying on concerns over supply disruptions in Indonesia -- the world’s largest nickel exporter and producer.

The floods in Indonesia will disrupt the exports of Nickel ore and Nickel pig production as a large number of mines have been affected which provided a short term boost to the nickel prices. US and Chinese Nickel premium showed an upside on concerns over limited supply.

According to INSG, the global Nickel market will be balanced showing a deficit of 50,000 tonnes-1,20,000 tonnes this year.

Outlook:

A short term bullish scenario may occur in Nickel prices on the account of supply disruption in Indonesia as it raises concerns over delayed shipment of Nickel ore and low Shanghai inventory.

This bullish outlook is for short term only as the rally will fade going forward on ample Chinese NPI supply and weak demand from stainless steel sector.

The upcoming important events like FOMC meeting, G-20 and the OPEC policy will provide further clarity.

We expect MCX Nickel prices to test Rs 960-Rs 1,000 per kg in the near term. Currently the MCX Nickel prices are trading at Rs 875 per kg.

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