Base Metals

Like most commodities, nickel has had a rough 2013. However, some market players believe an uptick may be coming in the not-too-distant future.

Like most commodities, nickel has not had a particularly favorable 2013. The metal is currently selling for $13,160 per metric ton (MT) on the London Metal Exchange (LME), down from $17,085 at the beginning of the year, and the International Nickel Study Group (INSG) believes it could record a 90,000-MT surplus this year.

In May, Nickel Investing News detailed a few of the overarching factors that are keeping nickel prices down. Here’s a brief rundown of the ones that have recently been most relevant:

  • New nickel pig iron technology: Midway through June, news surfaced that technical innovations have pushed the break-even cost for nickel pig iron produced via rotary kiln electric furnace in China down to $12,500 per metric ton. As nickel pig iron is a cheap substitute for nickel, buyers often prefer it to the real thing.
  • Oversupply: Commenting on the four-point decline that hit MetalMiner’s stainless steel price index in June, Lisa Reisman, managing editor of the publication, noted that nickel’s fundamentals “remain weak with both over-supply and weak stainless demand,” which together will “continue to put pressure” on the metal.

Independent analyst Tim Treadgold believes that one consequence of this lower pricing environment may be negative consequences for Australian nickel miners. Last month, he said that nickel mines in the country’s Goldfields-Esperance region may be forced to close if prices do not get better, stating that Minara Resources (ASX:MRE) and First Quantum Minerals (TSX:FM,LSE:FQM) “must be feeling the pressure.”

Just a few days ago, he followed that comment up by stating that First Quantum’s Ravensthorpe mine could be facing closure.

Price update

As mentioned, LME nickel is currently sitting at $13,160 per MT, down significantly from where it sat at the beginning of the year. However, the latest market news suggests an uptick may be coming in the not-too-distant future.

One industry source told Metal-Pages that “[t]he futures market has been getting shorter, and there has been increasing pressure on producers running at a loss to cut production. That has resulted in a buyers’ market to hunt for bargains, boosting the chances of a rebound in prices more than further price losses.”

Similarly, the INSG said in a recent report that the nickel market was almost in balance during April, also noting that “[n]ickel demand in early 2013 improved relative to the latter part of 2012.”

That said, the global nickel surplus hit 31,700 MT from January to April of this year, and the group still expects world nickel production to hit 1.86 million MT this year, with consumption trailing at 1.77 million MT.

Company news

Since receiving a rejection to its request to expand the open-pit site of its Cerro Matoso nickel project, major miner BHP Billiton (ASX:BHP,NYSE:BHP,LSE:BLT) has decided to apply for a separate environmental license, Metal-Pages reported. The project contributed much of the 47,000 MT of nickel produced by Colombia in 2012.

Talvivaara Mining Company (LSE:TALV) said on July 2 that it is planning organizational changes that could result in up to 250 of its employees losing their jobs, either permanently or temporarily. The coming changes are the result of the company’s need to reduce its costs and increase its efficiency in the wake of weak nickel prices.

Junior company news

Noront Resources (TSXV:NOT) announced midway through June that its plans to develop its deposits in Ontario’s Ring of Fire have not changed despite the fact that Cliffs Natural Resources (NYSE:CLF) has decided to temporarily suspend environmental assessment (EA) activities for its chromite project, which is located in the same area. The EA for Noront’s Eagle’s Nest nickel-copperplatinumpalladium project is in its final stages and the company expects to submit it to the government in the fall.

The Ban Phuc nickel project, which is 90-percent owned by Asian Mineral Resources’ (TSXV:ASN) subsidiary, Ban Phuc Nickel Mines, has begun producing nickel from nickel sulphide, Metal-Pages reported last week. At full capacity, the plant will produce 6,600 MT of nickel per year in addition to 3,300 MT of copper and 200 MT of cobalt.

The publication notes that Ban Phuc is the first mine and processing plant in Vietnam, but because the country hosts significant reserves of a variety of metals, mining activity in the country will likely increase in the near future.

Also last week, PolyMet Mining (TSX:POM,NYSEMKT:PLM) completed its $60.5-million rights offering, receiving “3,194 subscriptions for a total of $95.485 million for 144.674 million common shares” of the company.

On Tuesday, Anfield Nickel’s (TSXV:ANF) subsidiary, Mayaniquel, received an exploitation license for the Sechol area of its Mayaniquel nickel laterite project from the government of Guatemala. The license allows the company to mine all the nickel and iron mineralization contained within a specified area.

 

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

Related reading: 

Can the Anticipated 2013 Nickel Surplus be Reduced?

Bob Rae, Former Judge Leap Into Ring of Fire

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