960419

Europe physical

nickel weak, signs

it may pick up

LONDON: Slow demand, stocks of Russian uncut material and cheap stainless steel scrap all continued to weigh on the European physical nickel market during the last month, and some differentials eased under the pressure.

But traders said inquiries for primary nickel were picking up for the second and third quarters amid signs the long de-stocking phase in the steel industry was coming to an end.

"There are still good off-market stocks in Rotterdam of uncut material," said one physical trader. "The only guys who can work them off quickly are the stainless steel mills, and they are still not melting at full capacity," a producer source said.

"People can get stainless steel scrap and ferro-nickel at nice discounts, so even if the mills start melting at full capacity there will be a lag time before this starts eating into those stocks," he added.

"I am starting to see inquiries coming in for the second and third quarters," another trader added.

London Metal Exchange (LME) stocks rose on Friday, taking some traders by surprise. Stocks rose a net 732 tonnes, with the bulk of deliveries into warehouses in the form of briquettes.

"Briquettes are being delivered in, which is a sign that consumers are re-delivering material," an industry analyst said.

But the main trend in stocks was down as Western producers continued to take material off the exchange, traders said.

Stainless steel scrap was still in plentiful supply, with nickel-in-scrap quoted as low as 82 percent of primary nickel values. One trader saw the market at around 84 percent.

This compares with 85 to 88 percent one month ago.

"There is still a big oversupply of stainless steel scrap in Europe," said a scrap merchant.

Discounts for Russian uncut nickel were quoted between $70 and $100 a tonnne below LME cash values, down from $40 to $80 under four weeks ago. Western producer premiums were stable, quoted either side of $220 above LME cash for melting, unchanged from late March.

Views differed sharply over the likely impact of the planned liquidation of the beleaguered commodity company AIOC Corp, which was active on the physical nickel markets.

One analyst said he heard talk that AIOC had been holding 10,000 tonnes of physical nickel. But a trader said he doubted AIOC had a large physical position which may need to be sold.

"As far as I know the company tended to buy and sell on a regular basis, so I don't think they were holding on to big positions," he explained.

European traders are also monitoring events at the giant Russian Norilsk plant after gas supplies to the complex were cut sharply last week over a debt dispute. Norilsk said on Friday that gas supplies have resumed fully. Norilsk officials said the gas cut did not affect end production but some of its concentrate processing workshops did decrease output.

As it stands the world nickel market may be broadly in balance this year, the International Nickel Study Group said.-Reuter