The Stainless MMI fell by one point to 51 in February. Although nickel prices didn’t decline sharply in January, prices made a new 12-year low.

Free Sample Report: Our New February Metal Buying Outlook

Nickel was the worst performer among industrial metals in 2015. Interestingly, now analysts see nickel as having the greatest recovery potential. On average, analysts expect nickel prices to rise 20% this year and by almost 40% next year.

Stainless_Chart_February-2016_FNL

The main reason why analysts expect such a recovery is because nickel has fallen harder than any of its peers, being the only metal trading below the price lows of the 2008 financial crisis. However, to us, the fact that a metal has fallen in price is not reason enough to expect higher prices any time soon.

Shutdowns

Another factor making analysts turn bullish on nickel is that they believe nickel is likely to see immediate cutbacks. Brazilian miner Votorantim Metals announced in January its intentions to suspend two nickel operations, which would mark the first meaningful shutdown in the West.

Also, in Australia, Clive Palmer’s Queensland Nickel said it would lay off 240 workers near Townsville. These announcements are definitely a sign that mining companies are starting to struggle on low prices, but companies can struggle for a long time before shutdowns actually occur. The nickel market is facing the same issue as any other industrial metal: supply is doing anything it can before shutting down.

Believing that a wave of shutdowns is about to come among nickel producers seems like too much to expect from producers. Shuttering capacity remains challenging from both financial and social perspectives. In addition, non-China producers keep convincing themselves that Chinese nickel pig-iron producers will close first, partly because of the nickel ore constrains after Indonesia’s export ban and partly because of the perception that NPI makers are at the top of the global cost curve.

The issue with that prediction is that NPI producers have managed to cut costs and find a substitute to Indonesian ore — supply from the Philippines.

Compare Prices With the January 2016 MMI Report

We believe that shutdowns will probably come gradually since any individual closure will give hopes of survival to the rest of the market participants as they face less competition, encouraging those left over to keep running.

What This Means For Metal Buyers

Some people might see nickel as an attractive asset just because it looks “cheap” compared to historical levels. That could be true in the long term, but the timing could be way off. Right now, we don’t see any signs of a bottom. Nickel prices will likely turn around with the rest of the base metal complex, but that time hasn’t come yet. Stainless buyers should stay disciplined to their buying strategy.

Exact Stainless MMI and Nickel Prices, Trends

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Our Rare Earths MMI held steady at 17 this month. This is not news to anyone who has followed RE prices for any extended period of time as the trend line for this sub-index has remained markedly flat in this bearish market and even in better times for commodities.

Free Sample Report: Our February Metal Buying Outlook

REs enjoyed some movement in 2011 during the China-Japan RE price struggle, but the sub-index has remained flat from the time we started tracking the MMI in 2012. The magnets, phosphors and other high-tech elements just have not shown any real

Rare-Earths_Chart_February-2016_FNL

Lately, RE producers are either up for sale out of bankruptcy court, as in the case of Molycorp, Inc., or struggling under heavy debt loads as they are undercut by Chinese producers who don’t have any of the set-up costs of western miners.

However, if a recent study is to be believed, that could all change dramatically. A new study, Popular Science reports, shows it might be possible to extract RE elements from coal in the U.S. by rinsing discarded coal in a chemical solution.

“Essentially, REEs are sticking to the surface of molecules found in coal, and we use a special solution to pluck them out,” says Sarma Pisupati, an author of the study. “We experimented with many solvents to find one that is both inexpensive and environmentally friendly.”

Chinese Mining Crackdown

China is also stepping up efforts to restrict illegal mining and exporting of rare earths by setting up a system to certify the origin of supplies from the country. Beijing is also poised to impose a bunch of new environmental regulations including green export certificates and new taxes that are based on the value of the minerals, rather than on volume as is the case at present.

Compare Prices With The January 2016 MMI Report

New processes and better policing of exports could help this index see some price recovery later this years. Figures from the China Rare Earth Industry recently showed that about 90% of China’s RE producers are currently operating at a loss.

Actual Rare Earths Prices

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