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Commodity prices with upward momentum
Commodity prices with upward momentum

June 8, 2022 – Commodity prices are currently showing upward momentum. The background is Chinese economic programs starting up and the end of the lockdowns. Is nickel currently undervalued due to lack of liquidity? And Credit Suisse upgrades shares of a major EU stainless steel producer to “buy”.

Commodity prices with upward momentum

The new Chinese economic programs and the end of long Corona-related lockdowns, such as in Shanghai, are currently already fuelling commodity prices.

Chinese economy needs to catch up

Which is also a good sign, especially for the Chinese economy. Due to the long lockdowns, companies there have an immense need to catch up. But it is also a weighty factor for the Chinese government that the economy gets moving in 2022 – after all, it is an election year.

Base metal prices to remain high

The rating agency Moody’s also currently sees commodity prices continuing at a high level for the current year. According to Moody’s, base metal prices in particular will remain high, as the prices for copper, zinc, nickel and aluminum primarily reflect low inventories and supply risks in connection with Russia.

Nickel price undervalued due to lack of liquidity?

The nickel price on the London Metal Exchange (LME) is currently moving slowly upwards on average. Compared to the May 2022 average, it has already increased by about 2.5%. Chinese nickel spot prices have also increased by more than 3% in June compared to the average price from May.

Nevertheless, the nickel price on the LME currently appears to be undervalued. Background: Lost confidence in the LME and thus lack of liquidity.

LME has lost at least 50% of nickel liquidity

According to conservative estimates, the LME has lost at least 50% of nickel liquidity. Probably even significantly more, as daily nickel trades have plummeted by almost 80%, as a recent analysis shows.

When will the nickel valve burst?

The lack of confidence, the limited availability of nickel and the consequently also impaired liquidity on the LME, are currently holding back the nickel price and are likely to make it rise only slowly. There is enough upward pressure for the nickel price – the only question is when will the valve or the kettle burst?

Credit Suisse upgrades Outokumpu Oyj share to “Buy

European stainless steel producer Outokumpu Oyj was upgraded by equities analysts at Credit Suisse Group to a “buy” rating in a report released on Monday. The company currently has a $6.90 price target on the stock. Credit Suisse Group’s price target would represent a potential upside of about 20% from the stock’s current price on June 2, 2022.

Positive sign for the EU stainless steel demand

This is a positive sign for the entire European stainless steel industry and not only for manufacturers, but also for consumers. As the analysts from Credit Suisse currently expect a positive development in the stainless steel sector.

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