Nickel remains under pressure from negative news background

Nickel made a sharp pullback from the April highs, as indicated in last week's report. The local bottom was set at 23150, and a small rebound from this level took place yesterday. At the same time, the news background in the nickel market remains mostly negative, and the current rebound in prices has no solid basis except for technical factors.

According to the International Nickel Study Group (INSG), the global production of this metal will increase to 3.37 million tons this year. Thus, the supply will exceed last year's level by 10%. However, according to INSG, the global demand for nickel will grow only up to 3.13 million tons this year. It is 5.7% more than last year. Hence, the global nickel market is likely to be in surplus in the nearest future, and that exerts pressure on the metal's quotations.

The situation in the Chinese market of industrial metals is also not optimistic. According to SMM, the amount of Russian nickel coming to the Chinese market increases, and it prevents potential deficit and considerably shortens import surcharges on the price of this metal. Meanwhile, stainless steel prices have risen in recent days, but that still hasn't helped boost nickel sales.

Demand for nickel in Europe also demonstrates weakness. In addition, the Finnish company Fortum announced the start of raw materials extraction from used electric car batteries at a new recycling facility. Metals such as lithium, cobalt, and nickel can be recovered and reused for battery production. Accordingly, the increase in recycling reduces the need to purchase new batches of metals.

The current rebound in nickel prices could stop in the 24200-24400 range. A return to the previous local lows just above the 23150 is most likely in the future.

We may offer you the following option of trading strategy: 

Sell nickel in the range of 24200-24400. Take profit — 23150. Stop-loss — 25000.

Also, traders can use Trailing stop instead of fixed Stop-loss at their disposal.