China Nickel Depletion Fuels LME Stockpile Growth, Record nickel...

China Nickel Depletion Fuels LME Stockpile Growth,
Record nickel stockpiles monitored by the London Metal Exchange mask a balanced market as supplies were shifted out of China after a financing scandal, according to OAO GMK Norilsk Nickel (MNOD), the world’s largest producer. As much as 100,000 metric tons of the industrial metal may have been shipped to LME warehouses after banks tightened rules on loan collateral, according to Anton Berlin, head of strategic marketing at Norilsk. Lenders stopped accepting warrants from China after Qingdao port warehouses issued documents backed by more metal than they held. Nickel prices have fallen 24 percent from this year’s peak in May, with metal stockpiles monitored by the LME jumping 29 percent from the end of that month to a record 367,134 metric tons. China started investigating Qingdao in June, people with knowledge of the situation said at the time. “What is happening now is that the stockpiles are just flowing from non-transparent to transparent warehouses,” Berlin said in an Oct. 9 interview in Moscow. “We estimate that stockpiles in bonded warehouses in China were at about 100,000 tons of refined nickel at the start of the year, which approximately matches the volumes by which inventories registered by the London Metal Exchange increased.” Photographer: Andrey Rudakov/Bloomberg A wall is seen covered in the chemical symbols for precious metals including Platinum... Read More A 35 percent jump in stockpiles at registered Asian warehouses, to 217,806 tons since the end of May, is behind the global record, daily exchange figures showed Oct. 10. At the same time, inventories in Europe increased 14 percent, while in America they shrank 42 percent. ‘Undervalued’ Nickel The surge in official inventories shouldn’t affect the price as the market remains in balance, according to Berlin. Since May, nickel has dropped as low as $16,025 a ton on Oct. 2. Still, the metal remains the best performer on the LME, up 18 percent this year after Indonesia, the top exporter of nickel ore, banned shipments in January in an effort to boost domestic processing. The metal is “undervalued,” Berlin said. Financial investors in nickel are just following their “sentiment” on a stronger dollar and the slowdown in the U.S. and Chinese economies, he said. Those factors haven’t affected supply and demand on the nickel market yet, he said. Norilsk expects nickel to advance in 2015 as it continues to gain support from the Indonesian export ban, Berlin said. China is producing low grade ferro-nickel known as nickel pig iron, or NPI, using ore stockpiled before the restriction. In the first six months of the year, the Asian country’s smelters used half of its inventories and ore with a high nickel content is almost gone, he said. “We believe that Indonesia won’t change its approach,” Berlin said. Norilsk expects that Indonesia will export about 30,000 tons of nickel in NPI in 2015, the equivalent of less than 10 percent of the nickel ore it shipped to China in 2013, he said. China’s NPI output will fall to 200,000 to 250,000 tons next year, a drop of as much as 50 percent from this year, Berlin said. The country produced 490,000 tons of NPI in 2013, he said.