Morgan Stanley Sees Nickel Oversupply, Goldman Sees Rally

The nickel market remains oversupplied and prices will hover near current levels, according to a report by Morgan Stanley today that contrasts with forecasts from Citigroup Inc. and Goldman Sachs Group Inc. for a rally.

Prices for the metal used in stainless steel production will stay close to current spot levels in 2014 unless there is both a sustained pick-up in global steel demand and more supply-side production discipline, Morgan Stanley analysts Peter Richardson and Joel Crane wrote in a report today. This compares with Goldman raising its 12-month price target to $16,000 per metric ton from $15,000 yesterday.

Insufficient global output cuts will contain prices amid expected production ramp-ups at mines this year and as miners seek lower costs by producing more material, according to the Morgan Stanley report. Goldman analysts saw a potential shortage by the end of 2014 following the Indonesian ban. Nickel has climbed 6.3 percent this year, the most among the six main metals traded on the London Metal Exchange.

“Despite the implementation of the ban on exports from Indonesia, nickel remains our least favorite base metal exposure,” the Morgan Stanley analysts wrote. “Our outlook will remain poor until supply-demand fundamentals improve, most importantly in the form of production cuts.”

Morgan Stanley did see a long-term rise in prices should the Indonesian ban remain in place, according to the report. Both Barclays Plc and Macquarie Group Ltd. estimate the market may move into a deficit in 2015 and Citigroup forecasts the price at $17,000 a ton this quarter.

Nickel in London climbed to $14,790 a ton today, the highest level since Oct. 23, and traded at $14,775 a ton at 4:27 p.m. in Hong Kong.

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