BULLISH TRADING IS RISKY IN NICKEL
By Ibrahim Patel
Nickel traders across the world are confused with the development taking place in China. however, bulls would be taking excessive risk if they are trading going by the LME stock. Chinese traders are making trade in nickel with higher price, especially in Ferro nickel considered to be the substitute of nickel pig iron (NPI). Consequently, bullish trading being replaced in the LME nickel since last several days. currently 3 months futures are quoted around 14250, the level around the prior to ban imposed on nickel or export by Indonesia.
Given the LME data, it seems that money managers have adopted some net long positions. Marex Spectron, which collects alternative data of LME, indicates that investors are in net short position. the problem is such that traders who suffer losses during the last year rally of 21600 price are now not mentally ready for bullish trading. unless they are sure that LME stocks is on decline, they won't jump into the rally. recently the stock figures of all the base metals including LME nickel gives wrong signal about prices and create problem.
Analyst have collected such more evidence which suggests that now Chinese NPI sector is failing the impact of banned imposed on nickel ore exports by Indonesia at the beginning of 2014. Nickel ore stock is depleting rapidly in China which prompts people to believe that the NPI production is declining too. However, it is difficult to assume how much production has declined as it is similarly difficult to obtain real figures of nickel production in China. Currently stock is rising at the LME, but demand supply figures suggests that the bubble of uptrend in nickel price would fizzle out any time.
In the latest monthly report of international nickel study group, it was stated that the global refined nickel market was surplus by 25000 ton during the first two months of the current year. So if the nickel Pig iron production in china is on decline than it would be surprising development. We must remember that the worried with investment in several mega projects started while the super cycle of nickel was in full swing, the owner of such projects have continued with the production at full capacity. So we can say that the nickel production outside china is increasing.
It is also similarly true that the production is slowed down due to technical reasons at the projects started with a new technology known as High Pressure Acid Leach (HPAL). also the health of steel industry has weakened considerably which is the end user of nickel. Along with the construction industry, its health likely to worries further during fourth quarter.
[Courtesy - www.commoditydna.com]
Ibrahim Patel is well-experienced commodity & currency expert. He has writing experience in the field since 35 years. He is working in Sandesh Gujarati newspaper and also editor of www.commoditydna.com. He had vast experience in analysis of trends in comodity markets in Vyapar, a commercial newspaper from Mumbai.[/vc_column_text][/vc_column][/vc_row]
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