“We were struck by the effect of the Covid-19 pandemic on nickel - this has been a game changer for the market,” Nugent said. “Nickel is going to be the worst-affected base metal by end-use demand, which means it will be slowest to recover.”
The bank forecasts a 15% drop in end-user demand for nickel year on year in 2020, increasing the likelihood of a significant reduction in investment interest.
In the event of such a pullback, Citi’s three-month price target for the LME nickel price would be $11,000 per tonne, a 10% drop from its current level. The three-month nickel price was most recently around $12,225 per tonne on Friday May 29.
“In the event of a short-term pullback in risk, nickel would be the most bearish base metal,” Nugent added.
But Citi is not all-out bearish on nickel - it takes the medium-to-long-term view that nickel will underperform rather than...