Nickel Producers Looking More Attractive as Prices Rise

Reuters’ Andy Home yesterday published an article that states that “[n]ickel’s bull run has just gone into overdrive.” In it, he explains that one factor that’s helping push nickel prices up is the suspension of production at Vale SA’s (NYSE:VALE) Goro nickel processing plant in New Caledonia.

That said, Goro is really “no more than another bit of fuel to throw on what is a raging fire of a market.” Specifically, states Home:

It is a fundamental fig-leaf to “explain” a rally that is now feeding on its own momentum.

Hot investment money is flowing into the nickel market at a rate not seen in the base metals markets for many years.

LME market open interest has mushroomed to a record high of 310,350 lots from 230,000 lots at the start of the year.

As a result of that interest, nickel producers are becoming more attractive:

[Goro] is just one of several big new projects now entering production.

Until a few months ago, such projects, many of them initiated during nickel’s previous price boom in 2006-2007, were viewed through a bear prism.

They promised more supply in an already hugely oversupplied market. Analysts tracked their often painfully slow start-ups to calibrate the scale of that surplus.

From now on, though, they will be viewed through a bull prism, each set-back another reason to believe in higher prices.

The collective volte-face is down to the Indonesian ore ban, which has transformed the global nickel supply landscape, removing in one fell stroke almost a third of the world’s mine production.

Click here to read the full Reuters article.