Nickel: a metal in transition

China , Commodities , Indonesia , Metals , Nickel , the Philippines Nov 24, 2014 No Comments

NickelNickel for delivery in three months advanced 7.4 percent last week to settle at $16,450 a metric ton last Friday on the London Metal Exchange, the biggest jump since last month. The commodity has gained more than 18 percent this year.

Even if prices has risen sharply recently, nickel prices are expected to remain in positive territory through 2015, as the ban on Indonesian raw nickel continues and as exports from the Philippines drop due to seasonal changes.

The Philippines, which makes up roughly nine per cent of the nickel market and the only other major source of the high-grade laterites required by Chinese NPI factories after Indonesia, is soon heading into monsoon season with heavy rains expected to impact mining production.

Nickel supplies are already under stress from the continuing ban on nickel ore exports imposed by Indonesia in January. The country effectively halted all but processed metal shipments in January in an effort to force miners to build smelters, winning the country bigger returns from exports of its mineral resources.

David Wilson, analyst at Citi, said an examination of Indonesia’s nickel output and ore ban policy, Filipino mine growth potential and the Chinese nickel market supported a bullish view for nickel.

Last Tuesday, Bambang Adi Winarso, senior adviser to the coordinating minister for economic affairs, reaffirmed that Indonesia, the largest producer of mined nickel ore, will maintain its export ban.

“Inventories of nickel in all its various forms have fallen in China, with supply now falling as well in the form of a seasonal decline in Filipino exports,” Citigroup Inc. said. “Optimism remains strong toward nickel prices for 2015.” The bank is forecasting a global deficit of 62,400 tons in 2015, expanding to 103,600 tons in the following year. Many analysts say the outlook for the metal remains positive, even though LME stocks remained elevated at 390,000 tonnes.

However, the deficit is not expected to last for a long time, as there are several nickel reserves waiting to be tapped. One of them is the Kun-Manie project of Amur Minerals Corporation. Russia’s Ministry of Economic Development recently approved the production license application of the company which will eventually allow Amur Minerals to 830,000 tons of nickel located at the far east side of Russia.

Even though commencement of production work will not start until the prime minister gives his final approval, the high amount of mineralization in the Kurumkon Trend in the Kun-Manie site has made the project one of the 20 largest nickel copper sulphide projects in the world.

Another reason for nickel‘s rise last week was the fact that residential-construction permits in the U.S. climbed in October to a six-year high, the government said.

“Strong U.S. data, combined with supply concerns from Indonesia, is pulling nickel higher,” Tim Evans, the chief market strategist at Long Leaf Trading Group, Inc. in Chicago, said in a telephone interview. “We are seeing some buying across base metals.”

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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