China's nickel ore import may register 14% y/y growth in 2013 supported by stockpiling ahead of the 2014 Indonesian ore export ban, stated a recent market outlook by London based Barclays.

SRB (potentially amounting to 50Kt) and other private stockpiling is the force behind the import strength, alongside some support from financing demand. Chinese nickel prices have, however, shown no upward traction, reflecting how soft ‘real’ demand has been and the overall size of domestic stocks, it added.

January’s refined imports of 36Kt were double Barclay's expectation in that context and particularly surprising given sluggish conditions in the stainless sector.

Some producers have used the ore for financing and collateral, taking advantage of the lowest price since mid-2010 despite a near tripling in Chinese import levels over the same period. Overall, such signals indicate the strength in imports, alongside robust domestic production, is driving yet more oversupply in the Chinese market early this year.

Perhaps the most bearish component of this narrative is that LME stocks have risen close to 16Kt this year, indicating oversupply in the rest of the world persists despite this import demand.

Chinese trade data released this week was the strength in nickel imports. Net unwrought nickel imports rose close to 60% y/y to 20Kt, the highest since October 2011, while nickel matte imports were up a similar y/y proportion to 16Kt.

At the same time, laterite ore imports were 80% higher y/y to 5Mt. Taken in isolation, one could be forgiven for interpreting the data as evidence of a bullish restock by the Chinese nickel pig iron (NPI) and stainless steel sectors, satiated only by an increase in import levels. Such an assumption would be a mistaken according to Barclay's view.

Source: Barclays