Nickel: best performing base metal for the year

Australia , Commodities , Copper , Indonesia , Metals , Nickel Aug 13, 2014 No Comments

Nickel 2014The nickel market is still reacting to the ban on nickel ore exports imposed by top producer Indonesia earlier this year. That changed the landscape of the global nickel market, constricting supply to the biggest consumers in countries such as China, and sending prices soaring.

Nickel has gained the most of the six main metals on the LME this year, rising as much as 56% after the largest miner Indonesia banned exports of unprocessed ore, a raw material used to make a lower-grade nickel substitute known as nickel-pig iron. Refined nickel production will exceed demand by 44,200 tons this year before turning into shortage of 97,100 tons in 2015, according to Morgan Stanley.

Perth-based Avebury has announced plans to restart its nickel deposits in Tasmania after being shuttered for nearly six years. The company expects to make new investment of nearly $20 million to reopen the mine which is expected to produce nearly 12,000 tons of nickel concentrates per annum. The facility is expected to restart during early-2015.

Poseidon Nickel Ltd is preparing to resume production at a mine in Western Australia, while Panoramic Resources Ltd. may restart mining at its Copernicus deposit in the same state. More producers globally may reactivate facilities as prices extend gains, according to OAO GMK Norilsk Nickel, the world’s largest supplier.

Australia is certainly at the forefront of the potential for restarts,” said Stephen Briggs, a metal strategist at BNP Paribas in London, the second most-accurate nickel price forecaster in the eight quarters to June, according to rankings compiled by Bloomberg. “Nickel is one of my top picks,” he said in an Aug. 4 interview, describing $25,000 as plausible.

Last month the government allowed a handful of firms producing partially processed minerals such as copper concentrate, including Freeport McMoRan Inc, to resume exports.

However, “Nickel is different because if you are smelting in Indonesia the added value is much higher than copper,” Indonesia’s chief economic minister Chairul Tanjung told Reuters in a recent interview. “Because of that it’s a separate issue.”

Even as the deficit looms, reserves tracked by the LME expanded to the biggest ever this year, rising 22 percent to 318,798 tons on Aug. 8. Recent increases were probably caused in part by metal shipped out of China amid constraints on financing, according to Nicholas Snowdon, an analyst at Standard Chartered Plc. A probe into non-LME holdings in China’s Qingdao port in June led banks to cut back on such deals.

Prices dropped as much as 18 percent from May, declining last month for the first back-to-back retreat in a year. The volume of stockpiles will probably limit gains in prices until the market starts to move into deficit, possibly from 2015, according to Melbourne-based National Australia Bank Ltd.

Nickel prices rose from levels below $15,000 a tonne before the Indonesia ban, and are currently trading at just below $18,500 a tonne.

Pascal Blanc

Pascal has implemented numerous software solutions in the areas of procurement, sourcing, spend management, supplier evaluation and performance. His clients include Fortune 500 companies in Europe, Asia and North America. He is a co-founder of Source & Procure.

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