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Economic stimulus policies put in place by the government of China will be key to sustaining price rises among base metals in the coming quarters, Daria Efanova, head of research at UK-based services provider Sucden Financial, said during the company’s third-quarter metals webinar on Wednesday, August 2.
China demand has been a dominant theme for base metals so far in 2023, and it was a key focus in Sucden’s first-quarter and second-quarter webinars earlier this year.
Nickel showed strong downside moves during the quarter, linked to the same factors – China, central banks and construction materials.
“As of now,” Efanova said, “the support level of about $20,000 per tonne [for nickel] is holding firm and the spread is remaining in contango – again, highlighting that demand is not outstripping supply. In particular, the stimulus story and a slight recovery in steel demand are not enough to drive physical tightness.”
Nickel’s cash to three-month price spread was recently in a $205 per tonne contango.
“[Demand for use in the batteries for] electric vehicles remains a key factor in understanding the longer-term narrative for nickel,” Efanova said. “We expect [that sector] to drive an upside gain in the longer term, but for the third quarter [of 2023] we don’t yet see it as feasible, and not sufficient to drive prices higher.”
Supply from China is recovering, Efanova said, with smelters returning from maintenance outages in the third quarter, although this would not result in what she would describe as a “fully fledged recovery.”
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