Macquarie Says China Slowdown Hammers Hopes of Nickel Surge

The nickel market is going to let down any investors still betting on a shortage this year, according to analysts from Macquarie Group Ltd.

A rally in the metal to $15,000 a metric ton or more is “highly implausible” given weakening Chinese demand, persistent high stockpiles and investor focus on short-term demand risks, according to a note dated Aug. 14. Last month, the bank forecast the metal gaining to $15,000 by the year-end.

Macquarie switched its forecast of a 30,000-ton deficit this year to a 15,000-ton surplus, mainly due to lower-than-expected demand from China, the world’s biggest producer of stainless steel used in everything from consumer goods to oil pipes. Half the world’s nickel producers are making a loss at current prices, it said.

There’s no compelling evidence for a strong rebound in demand from the stainless steel sector and “in fact there are fears that demand is weakening in the very short term,” according to the note. “We continue to foresee a structural deficit from 2016 onwards due to the Indonesian ore ban, but until global growth prospects improve, we believe there is no rush to buy nickel.”

A ban on exports of ore from Indonesia at the start of 2014 fueled speculation that a shortage would propel nickel prices higher. The metal has slumped as China’s growth and appetite for commodities slow, and prices of the metal are at their lowest levels since 2009.

“Longer term, we retain a bullish stance on nickel,” Macquarie wrote. “However, that is of little interest to the market which is fixated on short-term demand risks, something we share.”

Nickel was up 0.2 percent at $10,625 on the London Metal Exchange by 2:12 p.m. on Monday.

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