Base Metals

TSX:BAR

While the nickel price has been on the rebound so far this year, it still has a ways to go. Will it continue rallying?

After a rocky 2015, the nickel price has gradually been on the rise thus far in 2016, although it’s still at historically low levels. Year-to-date, the metal has risen 18.07 precent to $4.65 as of August 16, having made a slight recovery with Asia being a contributing factor.
This is in part due to to the drastic turn nickel mining in the Philippines took in July, with the suspension of two nickel ore mines for environmental violations. Bloomberg reported that more shutdowns of mines in the Philippines is still to come, which is likely to make nickel a hot commodity, according to a UBS report.
The news undoubtedly shook the nickel mining world, as the Philippines was the leading producer of nickel in 2015. The country produced approximately 530,000 tonnes of the base metal last year, according to data from the US geological survey. The country took the top spot to become China’s leading source for nickel after Indonesia put a stop to shipments of unprocessed raw materials in 2014.
Additionally, FocusEconomics‘ August 2016 report states that authorities in the Philippines plan to increase taxes on mining companies in the country, which could put pressure on nickel supply from the Philippines in the near future. 
That being said, analysts surveyed by FocusEconomics see nickel prices dropping by the fourth quarter, averaging $9,892 per metric tonne, but picking back up to $10,844 per metric tonne by the fourth quarter in 2017.
Here’s an overview of what the outlook for the base metal looks like and what stocks to watch out for for those looking to invest in the nickel sector.

Nickel price reaches one-year high

In early August, nickel soared to a one-year high, rallying over 10 percent in the third quarter due to the restrictions in the Philippines’ mining industry, as mentioned above.
The mine closures have helped boost the nickel prices 22 percent year-to-date, but Business Standard suggests that future rallies are unlikely with the possibility of a stronger US dollar.
Meanwhile, the Economic Calendar reported that “nickel prices are running into resistance,” as the price dropped half a percentage point, “as traders digest bullish expectations for the commodity against the fact that the metal has already staged a strong rally.”
Still, nickel has been the best-performing base metal in the second half of 2016, also in part due to stainless-steel boosting consumption.
Global Ferronickel president, Dante Bravo, was quoted in Reuters, saying, “I am heartened to see the nickel price has improved recently.”
“Key economic indicators for China, which is the world’s largest consumer of nickel ore and accounts for nearly half the world’s nickel consumption, also continue to show stabilization,” he said in the publication.

Stocks rallying

While there’s still much speculation about what the future of the base metal holds, some nickel mining stocks have been on the rise this year. Here’s a quick look at some of those companies whose shares have risen by more than 100 percent:

  • Balmoral Resources (TSX:BAR): Shares of Balmoral Resources have increased significantly year-to-date, rising 167.44 percent to reach $1.55. The company is focused on developing high grade gold and base metal assets, including nickel, specifically the Grasset nickel project, which also hosts copper, cobalt, platinum and palladium mineralization;
  • Royal Nickel (TSX:RNX): In addition to producing nickel, the company also produces gold. The company’s main assets are the Beta Hunt gold and nickel mine in Western Australia and the Dumont Nickel project in Quebec, in addition to having a 30 percent interest in the Reed Mine in Manitoba. Year-to-date, Royal Nickel’s shares have risen 119.44 percent to $0.39;
  • First Point Minerals (TSX:FPX): The company is currently exploring for  awaruite nickel mineralization, which is a metallic nickel-iron alloy that contains little to no sulphides. Year-to-date, First Point’s shares have increased by 120 percent overall to $0.11.

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Securities Disclosure: I, Jocelyn Aspa, hold no direct investment interest in any company mentioned in this article.

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