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US investment bank Goldman Sachs said the refined nickel market has shifted from a major surplus in 2013 to a much smaller surplus in 2014, according to a research note Thursday, adding that prices are likely to continue to rally into 2015.
The bank notes that the buildup of LME warehouse stocks is merely a moving of stock from an Australian stockpile (since the start of 2013) and from Chinese bonded warehouses (following the Qingdao port investigation in Q2, when the authorities launched an investigation into trading companies for allegedly using warehouse receipts multiple times to secure financing from banks).
"Our research suggests that as much as 50,000 mt of the 66,000 mt LME stock increase in 2014, and as much as 75-80,000 mt of the 180,000 mt LME stock increase since the start of 2013, owes to stock shifting," it said.
Goldman Sachs said the price has rallied 30-35% year to date with prices stabilizing at $18,000-19,000/mt in recent months, driven by the Indonesian export ban on nickel ore which raised the marginal cost of nickel production.
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