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Blog
Rethinking the zinc and nickel forecasts
June 11, 2007
Latest on nonferrous metals
Price forecasts for the balance of this year point to a full-year zinc average below what was recorded in the first quarter of the year—when the London Metal Exchange three-months contract averaged $1.56/lb. Judging by what we’re seeing at mid-year, however, this view looks kind of conservative…others think so as well…since the latest from Macquarie Research has the LME zinc averaging $1.79 this year…Wachovia is looking at a $1.73 average…Standard Bank believes that $1.63 is a base from which additional rallies could be launched as supply/demand fundamentals continue to show improvement—as first quarter North American replacement battery shipments of 23.750 million units is 5% above comparable first quarter 2006 shipments…
And while most traders view nickel positively, Societe General, for one, is a bit more cautious with supply looking to make headway matched against consumption; thus, they say, closing the statistical shortfall that most other analysts have assumed. The International Nickel Study Group is also thinking about a nickel surplus this year. Their latest revised forecasts point to a surplus of 70,000 mt…at any rate, SG sees the nickel market “tight” but also sees slower demand and LME prices “below $40,000 in the coming months”…Standard Chartered Bank sees LME nickel averaging $18.79/lb this year. (Note: year-to-date cash nickel has averaged over $20…
Those that express some worry over the nickel market point to the changing primary nickel fundamentals; moderating stainless steel activity, exacerbated by product substitution; increased supply of Chinese nickel-containing pig iron and the recent increases in LME nickel inventories…
Also making news is the change in LME lending rules directed at those with large long nickel positions…basically, the exchange lowered tonnage limits at which brokers are required to lend metal to the market…thus, with more metal available (presumably,) this will have an immediate downward effect on nickel prices (as we’re seeing)…this will take several more days to sort through.
Posted by Robert J. (Bob) Garino on June 11, 2007 | Comments (0)