HONG KONG, April 16 — Like copper, China’s nickel imports probably jumped to a record high last month; also like copper, that surge is a misleading indicator of a market where end-user demand appears as anaemic as it was late last year.

Unlike copper, however, it is private investors — not the government’s strategic reserve agency — who are stockpiling the stuff, anticipating that beaten-down prices will soon follow other base metals higher as Chinese mills make more stainless steel, and who can get more bang for their buck with nickel.

“Investors have been buying physical nickel. They probably think the price has hit the bottom,” said Xu Aidong, nickel analyst at Antaike, the state-owned research group.

“Compared with copper and aluminium, nickel is more valuable. When you want to use 1 million yuan (RM527,000) to buy physical metal, you could get about 10 tonnes of nickel only, it is a small amount and easy to store,” she added.

Rising demand has lifted Chinese importers’ spot premiums by about US$100 (RM360) to near US$600 a tonne over cash LME prices for smelting grade nickel used by stainless steel mills, and over US$1,000 for plating grade versus US$800 for annual premiums.

The benchmark three-month contract on the London Metal Exchange bumped along near its lowest in almost six years until finally surging this week as more base metals followed copper’s steady gains. Prices have jumped 13 per cent this week to US$12,500 a tonne, but still well below a record high of US$51,800 in 2007.

By weight, nickel is twice as valuable as copper and eight times as aluminium, making it a good metal to be stored by private investors who normally do not have large storage space. Unlike gold, it’s an industrial metal that offers risk exposure.

The absence of nickel futures in China has also forced investors to buy physical metal to bet on higher prices. Shanghai copper futures, a popular speculative bet for Chinese investors, have surged 69 per cent this year.

“We sold an average of 100 tonnes of refined nickel a day in the past two weeks, compared to the normal 30 to 40 tonnes level,” a nickel sales manager at a trading house in Shanghai said.

“About 90 per cent of the sales were to people whose businesses are not nickel.”

And the Chinese have money to spend. Household yuan deposit rose 2.56 trillion yuan in the first quarter to 24.75 trillion yuan (US$3.62 trillion), according to central bank data.

And although economic growth in the first quarter slowed to a record low 6.1 per cent, many investors are hopeful that early signs of recovery will lead to a sustained rebound in demand for resources as stimulus spending comes through.

Xu said investors were also expecting the government’s State Reserves Bureau to buy nickel after it bought copper, aluminium and zinc in the past few months. In early March industry sources said the SRB could buy 10,000 to 20,000 tonnes of refined nickel, but there has been little evidence of action so far and unlike copper, it is not considered a strategic priority.

Imports at record?

Nickel traders estimate that imports by China, which consumes about a fifth of the world’s nickel, rose to about 20,000 tonnes in March, the highest ever and double the monthly norm, but fear that a domestic glut could quickly develop if interest ebbs.

“The metal is cheap now and investors expect nickel prices to rise,” said a nickel trader in Shanghai, saying his firm imported 1,000 tonnes, twice as much as previous months. “They bought the metal and stored it in their warehouses.”

China’s imports of refined nickel and nickel alloy already surged 66 per cent on the month to 12,690 tonnes in February. Data for March is expected to be released next week.

But traders said supply was tight in the spot market, possibly also due to less spot nickel from the top producer, Jinchuan Group Ltd. One trading source said Jinchuan had repaired a production facility in March, though a Jinchuan official did not confirm this.

In Shanghai, spot refined nickel traded at around 110,000 yuan per tonne yesterday, less than a quarter of the record high of 460,000 yuan struck in 2007, but the prices are still higher than the cost of imports.

Unreal demand

Investors such as rich businessmen in coastal Zhejiang and Jiangsu provinces were interested in stocking up on nickel as part of their investment portfolio, said the sales manager.

Firmer prices were also encouraging big plating plants in Guangdong province to build nickel stocks, although smaller plants had shut operations this year due to reduced export orders, a trader in Hong Kong said.

But demand from stainless steel mills, the top nickel user in China, which is the world’s biggest stainless steel producer, has stayed weak since the global economic slowdown reduced exports in the fourth quarter last year, traders said.

“Stainless steel mills are not buying much,” the trader in Shanghai said. He added a large stainless steel mill had resold some term imports of nickel on the domestic market at high prices.

A sales manager at a stainless steel tube producer in Zhejiang said the plant’s orders had fallen from the fourth quarter last year as clients had delayed new projects, including petrochemicals and oil, and it expected orders to remain low in the second quarter.

The firm offered spot tubes made from grade 304 stainless steel at about 15,000 yuan per tonne, down from 17,500 yuan in late 2008 and nearly 40,000 yuan in 2007. — Reuters

http://www.themalaysianinsider.com/i...