Spot nickel price levels not easily sustainable in the long run, says Norilsk

MOSCOW (Scrap Monster): According to Russian Nickel major Norilsk, the current spot price levels of the metal are unlikely to sustain the long run. The price movement of the metal will depend a lot on the proposed production cuts and draw-down of high exchange inventory levels.

Norilsk anticipates Nickel market surplus to range between 70,000 mt and 90,000 mt during the year 2016. The global primary nickel consumption is expected to remain unchanged at around 1.9 million mt during the current year, it says. With regards to price of the metal, Norilsk believes that the recovery in prices will be sustained only with more production cuts. At least one-fifth of the global supply needs to be trimmed.

Incidentally, many producer countries including China has already announced closure of operations of high cost operations. Additional production cuts are being scheduled for the year 2016. The restructuring of Nickel operations has started showing signs of gaining momentum in early-2016, Norilsk states. In addition, the exchange inventory levels of the metal are currently at their highest level off around half-a-million mt. Significant draw-down on inventory levels is compulsory for Nickel price momentum to sustain in the near future.

According to Norilsk, the nickel price cost curve is already at its bottom. There are very remote possibilities of a further fall in cost curve. The strengthening of the dollar and the weakening of the mining currencies should prevent further fall in cost curve. The price stability in oil should also support the metal prices in the near term.

Norilsk Nickel is headquartered in Moscow and is the world's leading producer of nickel and palladium. It is also ranked among the top ten copper producers.