Nickel prices were in rebound mode Tuesday following the news that Chinese banks extended $181 billion in new loans during September, contributing to a record nine-month run.
While nickel futures fell on Monday, on the LME Tuesday they were higher, recently seen up $130 at $10,420 per ton. Support was at $9,750 and resistance at $11,030.
China’s economic growth is important to the nickel market because nickel’s primary use is as a component of steel. As China’s economy grows, more building takes place, and this is good for nickel demand. There have been concerns that after high borrowing to stimulate the economy, China would clampdown on credit, and the economic rebound would stutter. In September, much of the credit growth was driven by an increase in home mortgages, and the country is starting to impose property restrictions to cool its red-hot real estate market. Meanwhile, on Wednesday China will release its third quarter GDP figures, which will provide key insight into how the country’s economy is faring.
Nickel prices have soared this year amid supply concerns following the big Philippine mining crackdown, data released from the International Nickel Supply Group indicated that the global nickel market returned to a balance in late August. The Group still sees a deficit for the first eight months of the year of 47,300 tons, with the possibility for a widening shortfall through the rest of the year, supported by increased Chinese demand and the fall in nickel output. It is important to note that the full results of the Philippines’ mining inspections and ensuing suspensions came in late September. On the supply side, world mine output fell 6.9% to 1.3457 million tons in the first eight months of the year, mainly due to a 21% drop in Philippine output across the period.