Nickel, Industrial Metals Rise As China Property Optimism Returns 

Base metals are on the rise after a series of positive announcements over the week has brought new optimism to China’s property sector. 

On Thursday, Nickel paced gains by most industrial metals on the London Metal Exchange, rising 2.5%. As shown below, spot prices for Nickel are moving higher as inventories continue to shrink, pointing to mounting supply tightness. 

“Nickel now looks to be the new game in town with stocks falling daily,” Malcolm Freeman, a director at Kingdom Futures, wrote in a note. “For now the bullish mood persists and there seems little point in going against it in the very short term.”

As global refined-nickel inventories continue to draw down, prices face volatility, trending toward gains, Huatai Futures Co. wrote in a note. 

Earlier this week, iron ore futures trading in Singapore bounced back over $100/ton after reports of Chinese regulators dialing back crackdowns on the property market could soon lift steel demand and improve profitability for steelmakers. There’s also chatter the People’s Bank of China could unleash stimulus amid the economic growth slowdown in the world’s second-largest economy.  

“The market has higher expectations for steel production to resume,” Huatai Futures Co. wrote in another note. Property is a leading source of industrial metal demand in the country. 

Bloomberg Industrial Metals Subindex (BCOMIN) has broken out to an all-time-highs, surpassing 2007 and 2011 highs. 

Positive developments appear on the macro front as the PBoC could be close to easing and Beijing dials back on regulatory crackdowns. Institutional investors are also getting in on the action as China’s high-yield bonds have had a bid this month. 

Suppose the Chinese government continues to offer policy support to heal the ailing property market, which it crushed this year through regulatory crackdowns. In that case, this could mean industrial metals will rise some more, adding to inflation.