Daily outlook for base metals prices

Quotes from Commerzbank Corporates & Markets:

-The nickel price slid below the $14,000 per ton mark again yesterday and this morning is trading below $13,900 at its lowest level in twelve months. The International Nickel Study Group (INSG) reported yesterday evening that the global nickel market in December had shown a supply surplus for the seventh straight month. In 2014 as a whole, supply thus outpaced demand by 94,300 tons. As such, the surplus was "only" nearly half as high as last year, though it was considerably higher than the INSG had estimated back in mid-October.

-Contrary to earlier fears and the view of many market participants, the global nickel market is thus very amply supplied despite the Indonesian ore export ban that has been in place since the beginning of 2014 - ultimately, this has doubtless contributed to the low price. The good supply situation is also highlighted by the high stock levels: the LME's warehouses are currently home to a record 426,000 tons of nickel, of which less than a quarter is earmarked for shipment.

-At prices below $14,000 per ton, Shanghai Metals Market (SMM) estimates that the majority of Chinese NPI producers are no longer profitable. Some NPI manufacturers may therefore decide to wait somewhat longer before reopening their production facilities following the break for the Chinese New Year festival, which would no doubt reduce supply. NPI accounts for roughly 25% of worldwide nickel production. We believe that possible production cuts should lend support to the nickel price.