As we approach the annual re-balancing of commodity indexes in January, a significant shift is imminent in the nickel mining market. Anticipated to experience a notable surge in buying activity, particularly for nickel, a crucial component in stainless steel production. Nickel has faced headwinds this year due to concerns about surpluses. The London Metal Exchange (LME) reports a 44% decline in nickel price in 2023, reaching a nadir of $16,710 per metric ton, the weakest since May 2021.
Impact of Re-balancing on Nickel Bar and Other Commodities
Traders are strategically preparing for the January 8-12 re-balancing period, anticipating a more significant impact on nickel than other commodities. Analysts at Societe Generale emphasise that nickel’s poor performance positions it as the most affected commodity during this period. Projected boosts for soy oil and lean hogs contrast with anticipated selling pressure on crude oil, lead, and sugar commodities. The yearly re-balancing, akin to past instances, sparks market rallies like Bloomberg’s lead inclusion in the commodity index last year.
Speculative Moves and Investment Projections
Citi analysts anticipate that the expected surge in nickel prices will likely intensify due to the unwinding of short positions, with investors expected to purchase nickel mining contracts worth $1.033 billion, totalling 9,974 contracts. However, projections from Societe Generale and Marex suggest a more conservative estimate. The final figure will ultimately hinge on the market dynamics at the close of December. The nickel-centric emphasis aside, a 35% decline in overall investment in commodity indexes challenges the notion of a super cycle.
In conclusion, the nickel coin market is poised for potential upheaval as market participants gear up for January’s annual re-balancing of commodity indexes. The market’s resilience during a tough year for nickel price suggests an imminent surge in buying, emphasising its dynamic nature. Market participants will keenly observe the re-balancing period’s impact on nickel prices, which is crucial in electric vehicle batteries and diverse industries.
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