Nickel prices still down but expected to rally in Q4 2015

By @chelean on
nickel ore in a ferronickel smelter
A worker displays nickel ore in a ferronickel smelter owned by state miner Aneka Tambang Tbk at Pomala district in Indonesia's southeast Sulawesi province March 30, 2011. The country accounts for roughly 7 percent of the world's total nickel mine output , according to Reuters data. Reuters/Yusuf Ahmad

The prices of nickel, along with other industrial metals, remain weak on the global market as frail Chinese data continues to pull the entire commodities market down. The base metal slump is led by copper, which slid to 3.8 percent to US$2.27 [AU$3.24] a pound, its biggest one-day decline in eight months.

Three-month London Metals Exchange (LME) ended up 1.8 percent weaker to US$9,690 [AU$13,813] a metric tonne on last trading. According to Edward Meir, a strategist at INTL FCStone, the world is now suffering from a commodity super slowdown that is showing no signs of “complete” recovery even in the near future.

“Worse-than-expected economic growth in the first half for most Asian economies and a delayed global recovery have led the Asian Development Bank to cut its regional forecasts for this year and next. The region’s economy will grow 5.8 percent in 2015 and 6.0 percent in 2016 — down in both cases from 6.3 percent previously forecast,” The Wall Street Journal reported .

However, some believe that nickel will experience a different fate in the last quarter of this year — a rebound that could give the industrial metal a decent start in 2016.

Brazil’s giant producer said that nickel prices would pick up in the second half of 2014, the last quarter being its strongest performance since 2015 began.

According to Metal Bulletin , Jennifer Maki, the company’s head of base metal business, said that while the overall sentiment for nickel remains negative, there are still "positive signs" in the market in the second quarter of 2015.

A strong nickel price would be advantageous for various nickel producers, especially the companies that are yet to put their products on the global market.

For instance, Russia-based Amur Minerals (London AIM: AMC) could benefit from this the moment it extracts and commercialise its 90 million tonnes of ore deposit. Currently, the company is focused on building its own smelting plants and implementing infrastructure and technological improvements on its very own Kun-Manie reserve, one of the largest nickel facilities in the world today.

However, many analysts and experts across the globe are still divided on the future of the entire base metals market.

Citigroup said that while there are some improvements in the segment despite ongoing economic problems in China, a massive — the worst in history since 2008 — commodities meltdown could still happen anytime soon, Bloomberg reported. Contrary to what Vale and Chinese company Jinchuan Group believe, Citibank, alongside Goldman Sachs and Morgan Stanley, still believe that a recovery in the last quarter remains blurry and could only possibly happen when 2016 begins.

“China's weak manufacturing data hasn't prompted a further decline in metals prices. The Bloomberg Industrial Metals Index, which is composed of aluminium, copper, nickel and zinc, rose for the first day in five after sinking the most in six weeks on Tuesday — the respite may be short lived,” said Mark Barton of Bloomberg TV.

Kyle Fitzsimmons of AG Metal Miner also said that the continuity of the ore ban in Indonesia will still play a significant role in keeping nickel and other base metals on the commodities market.

“While nickel prices started September near 2009 lows, there have been signs of promise for the metal as various global factors, including Indonesia’s decision to continue to ban unprocessed ores, could lead to a price hike as the month draws to a close,” he said.

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