Base Metals Weekly Round-Up: Nickel Takes the Lead

While this week was strong for most base metals, it was nickel that came out way, way ahead.

As investors began to worry about a supply deficit on the horizon, nickel prices skyrocketed on the London Metal Exchange (LME). After starting the week at US$13,345 per tonne, the metal’s price made leaps and bounds to hit US$14,675 by Thursday (July 18).

Also making a notable climb this week was lead; though the metal stayed fairly immobile at first, it surpassed the US$2,000 per tonne mark on Thursday when it hit US$2,019.

Zinc also managed to trend upwards this week, growing from Monday’s (July 15) price of US$2,460.50 per tonne to US$2,476 by Thursday.

Taking a small tumble this week was copper, which started Monday at US$5,997 per tonne and slipped to a weekly low of US$5,921.50 on Wednesday (July 17). The red metal managed to make a recovery on Thursday when it rose to US$5,946.

Maintaining its recent strength this week was iron ore, which stayed around the US$121 per tonne mark. As of 2:19 a.m. EDT on Friday (July 19), the metal had slightly cooled to US$120.61.

Base metals top news stories

1. Nickel Price Hits 1 Year Peak on Deficit Jitters

Base metal nickel skyrocketed to a one year high on Tuesday (July 16) as investor concerns about a potential shortage rose to the fore.

Nickel prices jumped as high as US$14,200 on the LME that day before simmering to a close of US$14,090. This was the metal’s highest level since July 5, 2018, when nickel hit US$14,150 before moving on a downward trajectory through the rest of the year.

While supply deficit concerns impacted the nickel space in 2018, sending prices on a rollercoaster ride, growth in areas such as nickel pig iron output have since helped bridge the gap.

2. Oyu Tolgoi Underground to See Cost Hike, Production Delay

Major miner Rio Tinto (ASX:RIO,LSE:RIO,NYSE:RIO) broke some less than pleasant news to shareholders this week with the announcement that its prized Oyu Tolgoi project will experience significant delays and a hefty capital increase for underground operation.

Located in Mongolia, Oyu Tolgoi is set to become one of the world’s largest copper mines, with its underground component set to see annual output of over 500,000 tonnes of copper upon full ramp up.

Rio approved the development of the underground operation in 2016 with first production estimated for 2020; the project’s open pit began production in 2013.

3. MMG’s Q2 Copper Production Falls After Las Bambas Protests

After local protests at its Las Bambas mine earlier this year, MMG’s (ASX:MMG,HKEX:1208) total Q2 copper production was down 17 percent from the previous quarter.

MMG stated that total copper in copper concentrate reached 84,695 tonnes during Q2 between its Las Bambas and Rosebery assets. This marked a 15 percent drop from Q2 2018. Also struggling year-on-year was copper cathode production from MMG’s Kinsevere mine, which fell 20 percent.

However, compared with Q1, Kinsevere’s production grew 31 percent, which the company said is in line with its revised mine plan.

Also in the news

Making headlines again this week, Western Areas (ASX:WSA,OTC Pink:WNARF) signed an offtake agreement with Sumitomo Metal Mining (TSE:8053,OTC Pink:SMMYY) for high-grade nickel sulfide precipitate from the company’s Forrestania operation. The one year contract has no set volume, but according to Western, “it is expected that all product produced will be sold into the agreement.”

Elsewhere, major miner BHP (ASX:BHP,NYSE:BHP,LSE:BHP) released its operational review for the 2019 financial year. While full-year copper production dropped 4 percent from the previous year, quarterly production grew 6 percent from the March quarter, with the company applauding strong performances from its Chilean operations.

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Securities Disclosure: I, Olivia Da Silva, hold no direct investment interest in any company mentioned in this article.