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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.
Nickel Supply and Demand
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.
The Price of Nickel and Nickel News Today
At the start of 2015, nickel market watchers were hoping to see a deficit in the second quarter of the year. At the very worst, analysts were calling for balance in the space after years of turmoil.
However, as those who’ve been watching the nickel news today are no doubt aware, neither of those positive predictions came true. In fact, quite the opposite happened — the nickel price crept steadily downward throughout 2015, ending the year just below $4 per pound.
Putting that into perspective, Bloomberg states that as of midway through December, the nickel price had fallen more than 40 percent since the start of the year. Meanwhile, The Sudbury Star recently described nickel as “the worst performing main contract on the London Metal Exchange,” noting that the metal reached its lowest price since June 2003 in November.
It’s tough to say whether 2016 will be a good year for nickel or another disappointment like 2015. While some of the positive commentary being discussed is certainly promising, it may be tough for investors to swallow given the current state of the market.
For clues on the nickel price forecast, it seems that China will be the key factor to watch. It’s also worth noting that nickel production cuts from major miners like Glencore (LSE:GLEN) may be in the cards.
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