Continuously decreasing nickel prices have made several banks stay pessimistic about the future of nickel prices. Leading banking firm Morgan Stanley reduced its nickel price forecast for the second half of 2015. The high demand for stainless steel parts manufacturers wasn't reason enough to prevent the bank from cutting down its forecast for the metal to $13, 228 per ton for the third quarter, a 12 percent decrease from its original forecast. For the final quarter, Morgan Stanley stated a forecast of $14, 448 per ton for nickel, reflecting less than 10 percent of the initial forecast.
This outlook is not so surprising, since nickel has been dragged down by the stainless steel sector, which constitutes 70 percent of the nickel's global output. Nickel has had quite a tough run in the beginning of the year, as economic growth in China, the world's largest consumer of the metal, has been slumping for a couple of months. As a result, the stainless steel sector is responding by selling nickel stocks at a cheap price.
Together with the decreased price forecasts, Morgan Stanley recommends buying metals over other bulk commodities like iron ore, steel and coal until the end of the year. Morgan Stanley analysts Tom Price and Joel Crane said that this move is necessary to counter-act the possibility of stimulus packages being implemented by both China and the United States.
"Any sustained second-half recovery event would need a surprisingly large stimulus event in China or the U.S. Which commodities would respond the most in this scenario? Metals," said the analysts in the report. The analysts also said that while they are considering the futures of nickel and aluminum, they remain "bearish" about the prices of other metals.
Nickel prices have remained volatile, since Forbes has released a speculation that Indonesia would take it easy on the export ban of raw minerals, including nickel. Indonesia used to be the world's biggest producer of the metal, but after it has imposed an export ban to improve its domestic mineral production, the Philippines has been filling the void with lesser quality Nickel Pig Iron (NPI). Forbes added that if Indonesia lifts its ban, nickel prices would further drop.
Indonesia has already lessened its limitations on copper exports and is planning to do the same with a raw material source of aluminum called bauxite. Industry experts believe that nickel exports will be the next. Website Hellenic Shipping News mentioned that it is quite "remarkable" that the Indonesian ore ban only entailed a short-term nickel price increase.
Even if Indonesia decides to keep its grips on nickel, the global supply is still in good hands, thanks to other developing mines that will focus on the production of high grade supply. Far East Russia's Amur Minerals Corporation (AIM: AMC) has just been awarded its detailed exploration license which will allow it to jump into the next phase of the project. The company is set to mine approximately 830,000 tons of high grade nickel and copper from its Kun-Manie site.
Another financial group, JPMorgan Chase released a statement that they would be "more comfortable" with a $10,000 nickel price forecast than a $17,000 per ton forecast. JP Morgan Chase is also concerned about the stainless steel demand, which it deemed "underwhelming" during the second quarter. "We now see little prospect of a sustainable nickel price or stainless steel stocking upturn ahead of the July/ August holiday period," stated the bank.
On the other hand, Australian bank ANZ believe nickel prices will improve in the near future. The bank released a report stating that nickel prices will shoot to $15,000 per ton in the next three months. One of the bank's analysts, Daniel Hynes, based the forecast on the London Metal Exchange's behavior.
"We have been mindful that despite signs of a tightening Chinese market, LME prices were unlikely to react until there was a meaningful fall in LME inventories. Over the past few months we have noticed a pick-up in cancelled warrants, an indication of material being readied for delivery. This has finally manifested itself in falling inventories. In fact, LME stocks recorded daily falls over 11 consecutive days - a trend not seen since 2011," noted Hynes in a report published by Barrons.