'Nickel prices to get a boost amid uncertainty over Indonesia's plans to ban exports'

Sakina Mandsaurwala

Precious metal prices have rallied for the last two weeks. Gold prices rose 4 percent last week at $1,515 per oz and Silver prices made gains of 4.6 percent trading at $17.05 per oz. There is a high probability that the Federal Reserve will initiate additional rate cuts beginning in September and possibly another rate cut in December.

Crude oil prices ended the week with 5 percent losses on heightened trade worries while Nymex natural gas prices traded near lows on expectation that stockpiles should reach a near-normal 3.7 tcf.

The base metal complex continues to trade indecisively due to the additional tariffs to be imposed on China from September 1. Despite the trade worries, metal prices gave a pullback last week with only Zinc being the loser among the base metals. Nickel rallied extraordinarily with 9 percent gains last week on fears on Indonesian raw material export ban.

Nickel prices hit a high of $16,687 on LME last week, rallying 50 percent so far this year, on speculation that Indonesia might bring forward the nickel ore export ban that is due in 2022, as soon as this year.

Under the regulation, Indonesia permitted relaxation of the five-year ban on nickel ore exports in 2017 giving miners a five year period to build their smelters within the country. The global demand supply scenario also shows supply deficit. Also, the stocks at the LME have fallen to 142,000 tonne, the lowest level since 2013.

Outlook:

If the Indonesian government advances its plan to ban ore export, we may see further upside in Nickel prices this year. Many big battery producers are concerned about the long term supply of nickel as the metal is in high demand due to rising consumption in EV sector.

We expect MCX Nickel prices to remain at Rs 1020 per kg in the near term and extending the rally towards Rs 1,250-1,300 per kg going ahead. However, the rally may subside if there is no immediate announcement of ban on nickel ore exports in Indonesia.

The author is a Commodity Analyst at Narnolia Financial Advisors Ltd.

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