Nickel is a high-luster, silver-white material whose valuable applications have allowed it to carve out a significant niche in the metals market.

The base metal exists in the Earth’s crust in two main deposit types: laterite and sulfide. Each deposit type presents unique challenges. For instance, sulfide deposits are found very deep in the crust, making extraction difficult. They also tend to be smaller than laterite deposits and often have variable grades.

In contrast, laterite deposits are near the surface and thus are conducive to open-pit mining. They also offer more consistent grades and are usually larger than sulfide deposits. However, a potential downside to laterite deposits is that ore extraction involves leaching with acids at high temperatures.

Once extracted, nickel is primarily used as a refined metal, with two-thirds of global output being put towards the production of stainless steel. The aerospace industry prizes nickel for its resistance to corrosion, and uses it in spades as a component of superalloys. The metal is also used in coins, catalysts and chemicals, rechargeable batteries, foundry products and plating.

As stainless steel is the largest source of demand for nickel, nickel demand is largely fueled by developing countries in the midst of infrastructure expansions. Indeed, since the early 1990s, the nickel price has seen steep climbs and descents due to changes in economic growth.

For instance, the collapse of the Eastern Bloc at that time led to significant nickel oversupply and a plummet in the metal’s price that was not corrected until the early years of the 21st century. Ultimately, the nickel price reached a peak of US$52,179 per tonne in May 2007 after registering a deficit of 44,000 tonnes the previous year.

In 2014, the world’s three top nickel producers were the Philippines, Russia and Indonesia. They produced 440,000 tonnes, 260,000 tonnes and 240,000 tonnes of the metal, respectively.

At the moment, Indonesia is a particularly key country for nickel investors to watch. It threw the nickel market into an interesting situation in 2014 when it banned unprocessed ore exports on the first of the year. The immediate result was an uptick in the nickel price, along with share price increases for many nickel-focused companies outside of Indonesia.

However, while the metal’s price continued to rise for almost the entire first half of that year, its fortune began to sour by the end of the summer. And unfortunately, it hasn’t seen any improvement in 2015. Halfway through the year, concerns were rife about rising stockpiles of the metal, and its price was below 2014 levels.

That said, a poor first half of 2015 doesn’t mean the writing is on the wall for nickel. Though the nickel price was below US$15,000 for the bulk of that period, it’s important to remember that it was above US$52,000 in the not-too-distant past. Investors interested in the nickel market would thus do well to remember that the resource space is cyclical by nature, meaning, essentially, that what goes down must ultimately come up.

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