RE: "Nickel booms as supply deficit looms"19 Aug 2019 10:50
[Continued]
“If end users have the prospect of a continuing supply deficit and higher prices then they’ll start to think about whether they can make stainless steel with less nickel, can we make electric vehicle batteries with less nickel.”
The spike in prices comes amid speculation Indonesia may bring forward an export ban that was planned for 2022. Australia's northern neighbour, which converts lower grade ore into nickel pig iron (a feedstock into stainless steel production), is keen to derive more value from its resources and build its industrial base.
“Indonesia for a few years now has been attempting to develop its downstream processing industries and not export too much in terms of raw commodities,” said Sean Fenton, portfolio manager at Sage Capital.
“They have certainly upped the ante in nickel.”
The spike in prices has lit a fuse under listed nickel producers, with Mincor Resources and Independence Group recently climbing to their highest levels since 2015. The stocks are up 59 per cent and 40 per cent respectively this year, while Western Areas is up 24 per cent. Investors will be looking for nickel price insights when Western Areas and BHP report profit results this week.
Mr Bradford said fears Indonesia may fast-track its ore ban had stoked the upward move in nickel, but the rise in prices has been a long time coming given the mismatch between growing demand and mine supply not only to feed current uses in stainless steel, but longer term use in electric car batteries.
“We’ve seen a bit of price spiking in the last week or so on the back of some more recent news, but the overall thematic is that we’re not making enough nickel to satisfy demand and that’s been the case for three-and-a-half years now,” Mr Bradford said.
“People are starting to project those deficits forward and the conclusion is that we’ve got an emerging squeeze on nickel and you’re starting to see a price response as a result of that.”
Mining analysts say it is hard to forecast the short-term outlook for the nickel price given the uncertainty about whether the ban will be brought forward. However, nickel prices are expected to advance over coming years given a lack of higher quality mines needed to provide the raw material for electric car batteries.
“Everyone has a view that nickel will edge its way higher over time because there is a shortage of these hard rock mines, and there is a shortage of mothballed old hard rock mines globally that can come back online,” said RBC Capital Markets analyst Paul Hissey.
“If you believe that demand is going to grow as a result of the rise of electric vehicles, and that would be our house view, then the world is going to need more nickel from hard rock mines over the next five years.”
But Mr Hissey said investors needed to be aware that it could take some time for higher prices to filter through to the bottom lines of nickel miners.
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