Decline in nickel prices comes from fundamentals

Fundamentals point to a downtrend formation for nickel prices.

BTR New Material Group, Chinese supplier of battery materials, forecasts a fall in nickel prices by about two-thirds to $8,000 per ton. Battery costs are expected to decline sharply, benefiting electric car manufacturers.

Vice general manager of BTR Yang Shunyi said at the China Automotive Battery Innovation Alliance forum that nickel prices would drop to $8,000 per ton compared to the current level of $24,000 per ton. This would be facilitated by the growth of the metal's mining capacity.

Yang Shunyi also spoke about visiting nickel producers in Indonesia. Now refineries with a planned production of 4 million tons of nickel per year are building in the country. For this reason, supply will exceed demand, and prices for the metal will inevitably fall.

BTR is one of the largest producers of battery materials in China. Nickel is widely used in the creation of electric vehicles, and in recent years several automakers have signed agreements with countries such as Indonesia.

Now instead of nickel, some automakers are planning to use cheaper lithium-iron-phosphate batteries with reduced energy density for smaller electric cars.

The automotive industry is searching for nickel alternatives, replacing the metal with a cheaper material for batteries. Therefore, nickel prices might drop due to oversupply.

In addition, SMM research shows that refining companies currently stop replenishing the metal’s stocks, and the shortage of pure nickel is slowly diminishing, so prices may have weak support in the near term.

The moving of the Stochastic Oscillator (standard values) came out of the overbought zone on the hour timeframe, signaling the price movement to the north. On the M30 timeframe the nickel price is in the formation of the second pullback wave, where the indicators of the higher timeframe show some completion of the second wave and the beginning of the third downward wave formation.

Signal:

The short-term outlook for nickel suggests selling. 

The target is at the level of 22,440.

Part of the profit should be taken near the level of 23,160.

The Stop-loss is at the level of 24,750.

Bearish trend is of short-term nature, so it is worth selecting the trading volume of not more than 2% of your balance.