Nickel Soars And Could Keep Flying As Demand Rises And Supply Falls.

Demand up. Supply down. Price heading for a 10-year high. It doesn’t get much better for nickel
22nd January 2021
Resources Rising Stars

Demand up. Supply down. Price heading for a 10-year high. It doesn’t get much better for nickel—except for the potential to get a lot better for a metal which has a well-earned reputation for extreme highs (and lows) (reports Tim Treadgold in Forbes).

Since suffering a Covid-19 collapse last March when the price fell to $10,800 a ton, nickel has been on a largely uninterrupted rise to last sales at $18,244/t, up almost 70% in 10 months.

Next target for nickel, which is a critical ingredient in high quality stainless steel and the batteries used in most electric vehicles (EVs) is $20,000/t, a level reached in the early 2012.

But, if a move back to levels seen in the last commodities boom sounds unlikely, then get ready for a rise to the great nickel rush of 2007, when the metal hit an all-time high of $50,000/t—before plunging to $9,200/t just two years later.

What sent nickel through the ceiling 14 years ago was a combination of supply shortages and strong demand for stainless steel.

This time around, nickel has a new price driver, EVs, a mode of transport which was not even a blip on commodity investors radar screens in 2007.

Mercurial in the extreme, nickel has been the subject of repeated booms (and busts), mainly because of supply shortages caused by labor disputes in big Canadian mines, or in the current situation from a labor dispute in a mine on the Pacific island of New Caledonia.

A dispute between management of Eramet, a French mining company, and the workforce at the company’s mines and a metal smelter on the island, is one of the causes of concern about a nickel shortage developing, with another supply issue being a ban on mining nickel ore on an island in the Philippines.

Any shortfall in nickel production will bump headlong into surging demand for stainless steel in China and increasingly in other countries as economic stimulus accelerates worldwide stainless steel demand.

Layered on top of the stainless steel issue is the advent of EVs as a mode of transport preferred by governments as they seek to reduce pollution from internal combustion engines in major cities.

Macquarie, an Australian-based investment bank, this week upgraded its outlook for nickel and nickel miners though its price tip for the metal has been overrun with the bank’s latest forecast of an average price this year of $16,177/t roughly $2000/t below the latest nickel price.

Morgan Stanley, another investment bank, said in a note published earlier this week that investors with an interest in commodities might have been so interested in the rising copper price that they missed the nickel rush.

“The move (by nickel) has been supported by a fall in China’s commodity exchange inventories to just $16,000/t, Tesla’s sales volume attracting investors looking to play the EV theme, and recovering stainless steel markets,” Morgan Stanley said.

The outlook, according to Morgan Stanley, is for stainless steel production to grow by 6% this year, requiring an extra 150,000t of nickel.

“In addition, we forecast 34,000t demand growth from EVs, taking our total nickel demand (growth) forecast to 6.4%,” the bank said.

“This will outpace supply growth. We see the market moving from an 85,000/t surplus in 2020 to an 18,000t deficit in 2021, supporting a price averaging $16,066/t with risk now skewed to our bull case forecast of $19,279/t.

 

Image: Bloomberg

Subscribe to the RRS Weekly Wrap

© 2021 Resources Rising Stars All Rights Reserved