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The company made that forecast at Wednesday’s investor day. It also announced that it’s looking to divest its Araguaia, Sipilou and Cosmos nickel properties as it looks to narrow its focus on core assets.
Glencore’s Sudbury nickel operations, Canada.
December 10 was diversified miner Glencore’s (LSE:GLEN) 2014 investor day, and those following the company were no doubt pleased with the amount of information that came out of it.
Company executives presented on most of the commodities Glencore is involved in, including copper, coal, oil and zinc, but for those in the nickel space no doubt the highlight was the talk from Peter Johnston and Kenny Ives. While Johnston provided an overview of what’s happening with the company’s nickel assets, Ives took the stand to discuss the nickel market as a whole — both revealed new information that’s certainly important to take note of.
Divestments coming
Though Johnston said that in terms of nickel production Glencore has had a “very, very good year,” he reminded investors that the mining giant still plans to divest some of its nickel properties as it hones its focus on its core assets.
On the chopping block are Araguaia, Sipilou and Cosmos. Araguaia and Sipilou are both laterite nickel-cobalt deposits, though the former is located in Brazil and the latter is situated in Cote d’Ivoire. Cosmos, which consists of two underground mines and a concentrator in Western Australia, is currently on care and maintenance.
Interestingly, an article from The West Australian notes that Cosmos was “the major target” for Xstrata when it took over Jubilee Mines back in 2007. Now, however, the asset “has no remaining economic mining reserves,” though it does hold over 100,000 tonnes of nickel in a measured resource of 13.6 million tonnes at 0.78 percent nickel.
It will be interesting to see which buyers step forward to claim those assets. The company expects to divest them in the next year or so.
Market outlook
Ives could hardly have put it better when he said that “nickel has had a rollercoaster year.” As he pointed out, the base metal has traded as low as $13,200 in 2014 and as high as $21,200, which is quite a range. Encouragingly, its current price is $16,500, which puts it up about 18 percent from the start of the year.
Of course, the real question is what’s next for the nickel price. Fortunately for fans of the base metal, Ives was also encouraging on that note. He said that though the market is set to record an 80,000-tonne surplus in 2014, he anticipates a balanced 2015, with a deficit emerging after that point.
In terms of how that will play out, he said that if all goes well, increased supply from new projects will support global production growth of about 1 percent per year through to 2019. However, with nickel demand growth projected at a “conservative” 4.5 percent per year, there won’t be enough supply to cover demand. The situation will come to a head beginning in 2018, when he predicts “substantial deficits.”
The upshot
2014 has been a year of uncertainty in the nickel market, and Glencore’s forecast provides some reassurance for investors that better times are on the way for the base metal. It shouldn’t be too long before investors will be able to tell whether the company’s predictions are playing out.
Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
