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02-10-2014, 11:46 PM
Price volatility dampens nickel miners’ gathering
THE AUSTRALIAN OCTOBER 03, 2014 12:00AM
Paul Garvey
Resources Reporter
Perth
Poseidon Nickel chief executive David Singleton expects the nickel market to fall into a Poseidon Nickel chief executive David Singleton expects the nickel market to fall into a ‘substantial deficit’ next year Source: News Corp Australia < PrevNext >
••
THE steep plunge in the nickel price witnessed in recent weeks cast a pall over yesterday’s Australian Nickel Conference, with an industry that would have felt it was safely out of the doldrums a month ago now detecting the return of a faint hint of unease.
The conference had been shaping up as a celebratory affair — the spot price of nickel soared by 57.7 per cent over the first half of the year but has since retreated by a fifth, from just under $US20,000 a tonne to just over $US16,000 a tonne, in a bloody past 3½ weeks of selling.
The steep volatility in nickel prices this year reflects the broad mix of factors behind both the cases for and against nickel.
The bull case revolves around Indonesian nickel pig iron, a cheap and crude source of nickel that had acted as a break on nickel prices in recent years. Indonesian authorities earlier this year implemented legislation banning the export of unprocessed nickel ore, triggering the startling price increase of the first half.
The Philippines is another major source of nickel pig iron, and authorities there have started talking about the possibility of a similar export ban.
On top of that, a new generation of costly new nickel developments continue to struggle to get anywhere near their expected levels of output.
And the years of delays and the billions of dollars in cost blowouts at those projects means any similar developments are unlikely to get the go ahead for at least another decade.
On the downside, the levels of nickel stockpiles held in the warehouses of the London Metal Exchange remain well in excess of anything ever seen before.
The potential ban on nickel pig iron exports from The Philippines could take several years to implement, and output from the country is actually growing in the meantime. Chinese companies are already building nickel smelters in Indonesia in an effort to bypass the export ban there.
And while those big new nickel mines are still producing well short of expectations, their output is growing, not shrinking.
Despite the recent weakness, Western Areas managing director Dan Lougher said conditions in the nickel sector now were still far better than a year ago.
He said his reception at a recent roadshow to North America, London, Sydney and Melbourne was the best for “at least” five years. “We’re making a lot more money in this half of the year than we did in the whole past two years,” Mr Lougher said.
He is confident the nickel price can resume its upward run by the end of the year.
“There is an oversupply at the moment. The turnaround that we all anticipated with the drop-off in nickel pig iron, obviously some of that is being picked up by the Philippines volumes going into the Chinese market. Is the Filipino ore filing the gap? It can’t. I’m very confident that towards the end of the year we will start to see some of that eroded.”
Alto Capital research analyst Casey Smith has recognised the headwinds facing the sector, but is still tipping nickel to average $US20,000 a tonne next year.
“Between 2013 and the end of next year, China is forecast to have lost 300,000 tonnes of its ore sources of nickel,” Mr Smith said.
The three-year rise in LME stockpiles to record levels doesn’t worry Poseidon Nickel chief executive David Singleton, who expects the market to fall into a “substantial deficit” next year.
“I think we can confidently expect that by the end of this year, the very early part of next year, we would start to see those LME stockpiles come down. That will really be the trigger for the nickel price next year.”
THE AUSTRALIAN OCTOBER 03, 2014 12:00AM
Paul Garvey
Resources Reporter
Perth
Poseidon Nickel chief executive David Singleton expects the nickel market to fall into a Poseidon Nickel chief executive David Singleton expects the nickel market to fall into a ‘substantial deficit’ next year Source: News Corp Australia < PrevNext >
••
THE steep plunge in the nickel price witnessed in recent weeks cast a pall over yesterday’s Australian Nickel Conference, with an industry that would have felt it was safely out of the doldrums a month ago now detecting the return of a faint hint of unease.
The conference had been shaping up as a celebratory affair — the spot price of nickel soared by 57.7 per cent over the first half of the year but has since retreated by a fifth, from just under $US20,000 a tonne to just over $US16,000 a tonne, in a bloody past 3½ weeks of selling.
The steep volatility in nickel prices this year reflects the broad mix of factors behind both the cases for and against nickel.
The bull case revolves around Indonesian nickel pig iron, a cheap and crude source of nickel that had acted as a break on nickel prices in recent years. Indonesian authorities earlier this year implemented legislation banning the export of unprocessed nickel ore, triggering the startling price increase of the first half.
The Philippines is another major source of nickel pig iron, and authorities there have started talking about the possibility of a similar export ban.
On top of that, a new generation of costly new nickel developments continue to struggle to get anywhere near their expected levels of output.
And the years of delays and the billions of dollars in cost blowouts at those projects means any similar developments are unlikely to get the go ahead for at least another decade.
On the downside, the levels of nickel stockpiles held in the warehouses of the London Metal Exchange remain well in excess of anything ever seen before.
The potential ban on nickel pig iron exports from The Philippines could take several years to implement, and output from the country is actually growing in the meantime. Chinese companies are already building nickel smelters in Indonesia in an effort to bypass the export ban there.
And while those big new nickel mines are still producing well short of expectations, their output is growing, not shrinking.
Despite the recent weakness, Western Areas managing director Dan Lougher said conditions in the nickel sector now were still far better than a year ago.
He said his reception at a recent roadshow to North America, London, Sydney and Melbourne was the best for “at least” five years. “We’re making a lot more money in this half of the year than we did in the whole past two years,” Mr Lougher said.
He is confident the nickel price can resume its upward run by the end of the year.
“There is an oversupply at the moment. The turnaround that we all anticipated with the drop-off in nickel pig iron, obviously some of that is being picked up by the Philippines volumes going into the Chinese market. Is the Filipino ore filing the gap? It can’t. I’m very confident that towards the end of the year we will start to see some of that eroded.”
Alto Capital research analyst Casey Smith has recognised the headwinds facing the sector, but is still tipping nickel to average $US20,000 a tonne next year.
“Between 2013 and the end of next year, China is forecast to have lost 300,000 tonnes of its ore sources of nickel,” Mr Smith said.
The three-year rise in LME stockpiles to record levels doesn’t worry Poseidon Nickel chief executive David Singleton, who expects the market to fall into a “substantial deficit” next year.
“I think we can confidently expect that by the end of this year, the very early part of next year, we would start to see those LME stockpiles come down. That will really be the trigger for the nickel price next year.”