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Chinese Traders Optimistic On Nickel’s Prospects

Commodities | Mar 23 2010

By Chris Shaw

Analysts at Barclays Capital attended a recent stainless steel conference in Wuxi, China, providing them with greater insight into current conditions and views in the Chinese market. Companies in attendance account for around half of stainless steel volumes in Wuxi, the Wuxi market in turn accounts for around 50% of total Chinese volumes.

China is now estimated to make up about 30% of global nickel demand, so the 21% rise in Chinese demand last year was important in offsetting weakness elsewhere in the global market. Barclays notes stainless steel accounted for about 75% of total Chinese nickel demand in 2009, well above the 10-year average of 45%.

A key conference takeaway for Barclays was Chinese domestic demand appears to have improved in recent months. Only 22% of traders are reporting lower current order levels to stainless steel mills compared with the second half of last year, while only 10% are seeing weaker orders from end-use customers.

Looking at prospects for 2010, Barclays notes half of the traders at the conference expect stronger volumes this year than in 2009, while half expect volumes to be broadly unchanged.

The major potential negative is inventory levels, with 31% in attendance regarding these as high at present. In comparison, 60% of those in attendance viewed inventory levels as average.

Overall, Barclays suggests conference participants remain optimistic about nickel's price prospects, 55% expecting the LME cash nickel price will be above US$22,000 per tonne by the end of the year. Nickel closed overnight at US$22,350 per tonne.

Note for paying subscribers at FNArena: see also this week's Weekly Insights email (should be in your inbox) titled "Nickel, The Leader Of The Pack?"

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