Macquarie Commodities Research has reported that extreme destocking is now prevalent from nickel ore to stainless steel, and once nickel metal and ore, and stainless steel prices are perceived to have bottomed, there could be another rush to buy.
A sharp fall in nickel pig iron output can be expected in 2015 due to the depletion of Indonesian high-grade ore stocks by the second quarter of 2015 and limited availability of mid- and high-grade ores.
“Even after allowing for weaker demand growth and higher nickel pig iron production than previously expected, our global nickel supply/demand balance still points to the emergence of a significant deficit between supply and demand in 2015,” Macquaries report stated.
When nickel stocks on the London Metal Exchange start falling — though probably not until second quarter 2015 — this could be the catalyst for a reversal of fund positions. And if nickel prices start rising, this could be the catalyst for another surge in stainless steel orders and restocking.