Nickel price continues to be weak

by David Fleschen

The nickel price continues to be weak, dropping to a 3½-month low of around $ 14,300 a ton this morning. So far, nickel has fallen by more than 14% in November, even more than 20% from its 5-year high in early September. Thus, the nickel price is now in a situation that is referred to in financial jargon as a bear market. At least some temporary relaxation signals on the supply side contributed to the price decline. Many market observers expect the supply deficit to continue to contract sharply next year, as production is expected to grow strongly again. For example, one of the world's largest nickel producers, which assumes a deficit of 28,000 tons in 2020, making it more optimistic than the International Nickel Study Group. Although demand is also expected to grow by a robust 5%, this is not enough to completely cushion the estimated supply growth of 8%. In addition to the fundamental aspect, the technical picture has deteriorated significantly after "round" brands as well as the 100-day line were broken down. Should the 200-day line within reach not continue, this should lead to further technical sales. In addition, according to LME statistics, speculative financial investors in nickel have retreated noticeably last week - they have reduced their net long positions by 20% - and thus probably played their part in the falling prices. In our view, the momentum indicates that the correction of the nickel price will initially continue. In the long term, however, the expected strong nickel demand for batteries should support the price or give it a significant boost.

Source: Commerzbank Research, Photo: Fotolia

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