Base Metals

Sherritt International recently released its financial results for 2014’s fourth quarter. They show larger-than-expected losses, but the company is still confident the nickel price will rise later this year.

Sherritt International (TSX:S) recently released its financial results for 2014′s fourth quarter. They show larger-than-expected losses, but the company is still confident the nickel price will rise later this year. 

The company reported a net loss of C$0.27 per share from continuing operations, which Reuters states is a higher loss than the C$0.19 analysts predicted. Sherritt has identified the strong US dollar and a drop in the nickel price — which fell 15 percent in the fourth quarter — as responsible for its results.

Last year’s ups and downs

2014 was a tumultuous year for nickel. One major event was Indonesia’s implementation of an export ban early in the year. The ban quickly increased the nickel price, with reports at the time suggesting nickel could average $15,000 per ton in 2014 and $17,000 per ton in 2015. Ultimately, the restrictions drove the metal’s price up as much as 56 percent.

The news also benefited nickel miners from other parts of the world, such as the Philippines, which increased output to fill the gap left by Indonesia and has now replaced it as the largest nickel ore supplier to China.

However, as China’s import demands decreased and supply numbers were evaluated, it became evident that nickel stockpiles were at a record high. Inventories monitored by the London Market Exchange showed a record of 353,340 tons in September 2014, with supply exceeding demand after three months of shortages.

Positive outlook for 2015 

Even after a tough fourth quarter, Sherritt remains optimistic that the nickel market will rebound later this year and believes Indonesia’s continued export ban will even out the excess supply from 2014. While January 2015 marked the fifth month global nickel supply has exceeded demand, the gap is closing slowly but surely, and the surplus narrowed to 3,000 tons in November from 13,000 tons the previous month.

And while January saw ups and downs in the price of nickel for delivery in three months, a report done by Jefferies Group in January forecasts a global nickel deficit of 40,000 tons in 2015 after the 45,000-ton surplus in 2014.

In that light, Sherritt has raised its nickel production forecast for this year, and expects its Ambatovy joint venture to produce 80,000 to 86,000 tonnes of nickel, up 19 percent from last year.

It will certainly be interesting to see if Sherritt’s predictions for the nickel price come to pass. It will also be interesting to see whether the company benefits from US President Barack Obama’s plans to restore diplomatic relations with Cuba, where Sherritt is focused. Though Obama announced plans to do that in December, a bill aiming to lift the trade embargo against the country has just been introduced by US senators.

At close of day Thursday, Sherritt’s share price was sitting at $2.09, down 0.95 percent.


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

Related reading:

Nickel Outlook 2015: Deficit May Be in the Cards by Q2


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