Oversupply and weak demand are likely to continue to weigh on the nickel price, Bank of America/Merrill Lynch said in a research note Monday.
The main reason for the bear market in nickel is the "spectacular slowdown" in the stainless industry, according to the research.
"As to supply, producers in world ex-China increased production, thereby largely offsetting the decline of Chinese nickel pig iron output," it said.
Chinese NPI production is now 250,000 mt below peak, equivalent to 10% of global supply.
Although some miners have started cutting mine output, and mothballing whole mines, "more cuts may be necessary to rebalance the market," it said.
Demand from many sectors important for stainless steel in China went through a soft patch last year, "which was exacerbated by a drop in stainless steel exports; industry consolidation did not help either.
Meanwhile, market participants in World ex-China have destocked as nickel and stainless steel prices declined."
It said demand growth may improve in 2016, but a sharp acceleration is unlikely.
"While some mine culls have now come through, we believe they have not been sufficient to rebalance the market yet. As such, we remain cautious nickel for now," BoA/ML concluded, without providing any price forecasts.
Three-month nickel was spot bid on LMEselect at $8,170/mt as of 1008 GMT Monday.
