nickel price

A lighted underground tunnel in a nickel mine

Nickel prices increased early in February with hedge funds and speculators hurrying to close bets against the metal with the Philippines moving ahead with regulations on its mining industry.

According to a recent report from the Financial Times, nickel’s climb was directly attributed to the closure of 21 mines along with the suspension of another six pits, including the nation’s largest gold mine.

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The Philippines is the world’s most significant source of unprocessed nickel ore, along with being a major supplier to China, the news source stated. A renewed emphasis on environmentalism led to Philippines’ President Rodrigo Duterte appointing a like-minded resource minister to investigate the nation’s mining industry.

“My issue here is not about mining, my issue here is about social justice,” Regina Lopez, natural resources secretary, said during a recent briefing. “Why is mining more important than people’s lives?”

Nickel Price Outlook for 2017

Lopez pointed at the mine closures, which account for nearly half of the nation’s nickel output.

“We are very pleased to see the Philippines taking this action while allowing proper mining companies which adhere to better environmental practice to continue,” analysts at SP Angel told the Financial Times, adding the whole nickel supply chain was an “environmental disaster”.

“The huge growth of ore exports into China for the production of nickel pig iron disrupted the nickel industry in recent years while causing massive environmental disruption in the mining areas and at the nickel pig-iron furnaces.”

How will nickel and base metals fare in 2017? You can find a more in-depth copper price forecast and outlook in our brand new Monthly Metal Buying Outlook report. For a short- and long-term buying strategy with specific price thresholds:

 

A Washington, D.C. federal judge refused Monday to halt construction and drilling on the recently approved, eight-mile final stage of the Dakota Access pipeline, rejecting the Cheyenne River Sioux Tribe’s plea for a temporary restraining order to ostensibly protect a religiously and culturally significant lake.

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A similar challenge was rejected by another federal judge last year.

Philippines Environment Czar Cancels 75 Mining Contracts

The Philippines’  Environment Ministry, under the direction of Environment and Natural Resources Secretary Regina Lopez, on Tuesday ordered the cancellation of 75 mining contracts, stepping up a campaign to stop extraction of resources in sensitive areas after earlier shutting more than half of the country’s operating mines, Reuters reported. The contracts are all in watershed zones, with many in the exploration stage.

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They cover projects not yet in production and the latest action by Lopez suggests she will not allow them to be developed further. The move turns up the heat in her battle with the mining sector after she ordered the closure of 23 of the country’s 41 mines earlier this month on environmental grounds.

Nickel was said to be in a supply deficit last year of 209,000 metric tons, according to Bloomberg, and is projected to remain in deficit this year to the tune of 188,000 mt.

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The Philippines has just ordered the closure of 21 mines and the suspension of another six. The island chain is a source of around half of the country’s nickel output. After Indonesia’s 2014 export ban, the Philippines became the world’s largest exporter of nickel ore and the primary supplier to China’s massive nickel-pig iron industry, raw material for the alloying of stainless steel.

Stagnant Prices

Yet, while there has been an uptick in prices, nickel’s performance can hardly be said to have been stellar. Since the middle of the summer the London Metal Exchange‘s LMEX index of six key base metals is up almost 18% yet nickel has risen by only 1.2%.

Deficit or not, the market does not seem to be in short supply yet. Between Indonesia and the Philippines the two countries produced about 700,000 metric tons of nickel a year in 2014 and 2015, with about 170,000 mt of that coming from Indonesia due to the export ban.

Chinese buyers simply switched to the Philippines as supplies dried up from Indonesia and drew down on extensive stocks they had amassed in advance of the export ban. Just as the Philippines’ new firebrand environment and natural resources secretary, Regina Lopez, moved to close environmentally damaging open pit mines, Indonesia is increasing exports again. Investors have their eye on a probable surplus towards the end of the decade as both countries return to some level of consistent supply. This graph illustrates the rise of the Philippines and since the export ban the relative decline of Indonesian shipments.

Nickel production

Nickel from major producers in the last nine years. Source: U.S. Geological Survey.

Of course, it’s not clear at this stage how quickly mining companies will be able to implement stricter environmental conditions that are likely to be applied by the new administration of Philippines President Roderigo Duterte, but it would seem that the action is not unjustified with comments in the Financial Times describing the Philippines’ nickel supply chain as an environmental disaster. Read more

On Thursday, the Philippines ordered the closure of 21 mines, and seven others could be suspended. The country previously suspended nickel mines last year. The nickel mines recently ordered to shut down account for about 50% of the country’s annual output.

Nickel Prices Rebound

Nickel Rebounds on news of the Philippines’ shutdowns. Source: MetalMiner analysis of fastmarkets.com data.

Nickel rose sharply on the news. Over the last few weeks, nickel prices were struggling to make headway as investors feared that the easing of the Indonesian export ban would bring more ore supply into global markets.

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Now we have two factors, Indonesia’s easing of its export ban and the Philippines’ shutdowns, that could drive prices in opposite directions. However, as we explained recently, the mining shutdowns in the Philippines are likely to be a greater driver of prices. Read more

nickel-ore-mine

mulderphoto / Adobe Stock

It’s been all quiet on the nickel front recently as the metal is essentially even as the Chinese Lunar New Year Holiday approaches.

According to a recent report from the Economic Calendar, nickel prices ended Tuesday slightly higher due to a lower U.S. dollar, which offset the slight decline nickel saw on Monday this week.

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Wrote Leia Toovey for Economic Calendar: “Chinese businesses and markets will close on Jan. 27 and factories will remain closed for at least a week. With business activity at a standstill, demand for base metals from its top consumer will remain muted while there will also be fewer speculators placing their bets. With Chinese buyers absent, nickel is likely to garner the majority of its price momentum from the US dollar.”

Nickel Miners to Boost Exports?

Our own Stuart Burns recently wrote that Indonesian nickel miners might soon be allowed to export up to 5.2 million tons fo low-grade nickel ore a year. Burns wrote:

“The intent seems now to be to allow nickel miners to export providing they dedicate at least 30% of their smelter capacity to processing low-grade ore, defined as below 1.7% nickel. They can then export any excess capacity they have. That said, this move means that up to 70% of Indonesia’s nickel production capacity could potentially be put on the market, which would be equivalent to around 14% of global capacity.”

How will nickel and base metals fare in 2017? You can find a more in-depth copper price forecast and outlook in our brand new Monthly Metal Buying Outlook report. For a short- and long-term buying strategy with specific price thresholds:

Or at least if that wasn’t the intent, it’s likely how the smelters feel.

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In an about face on Indonesia’s 2014 export ban across a range of minerals, Energy and Mineral Resources Minister Ignasius Jonan said this week that local miners might be allowed to export up to 5.2 million tons of low-grade nickel ore a year, partially reversing the ban intended to force buyers to set up value-add refining facilities in Indonesia.

The export ban has been relatively successful. Export volumes, of course, plummeted from about 60 million metric tons before the 2014 ban was enforced but new refineries have been set up and refined volumes of value-add material have increased. Read more

An Indonesian Finance Ministry official said the government may not be done tinkering with export tax rules involving raw ore just yet. The island nation’s Energy and Mineral Resources Ministry partially lifted a ban on raw ore exports late last week.

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“We want the export duties to push domestic processing. That’s the principle,” Suahasil Nazara, head of the Fiscal Policy Office at the Finance Ministry, told reporters, adding that the taxes were “not just for increasing state revenues. There’s a high possibility we will continue with a scheme that has layers, depending on completion of smelters.”

Outokumpu Adds to North American Stainless Rebar Line

Outokumpu recently unveiled a new stainless rebar offering for the North American market at the World of Concrete trade show in Las Vegas.

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Following an expansion of its stainless rebar capabilities at its facilities in Richburg, S.C., Outokumpu will now sell stainless rebar in coil, cut-to-length or in bent shapes. The Richburg facility has capabilities to cover a full range of rebar dimensions between sizes #3 and #8 (from .375 inches to 1 inch) and lengths up to 60 feet, and will offer short lead times for customers in North America.

Indonesia issued significant new mining rules last Thursday that will relax its ban on exports of nickel ore. Over the weekend, I went to check analysts’ opinions on this new development. Not surprisingly, almost everyone thinks this is bearish news for nickel prices.

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I am often a contrarian and this time, of course, I have a different opinion. I think the outcome of this revision is bullish for prices. What’s more, I think this is a great opportunity to buy nickel since prices might trade above today’s levels for the rest of the year.

Indonesian Nickel Ban

Before we get to analyze the price impact of the new rules, let’s quickly review what the ban was about in the first place:

Indonesia imposed an export ban for unprocessed material — essentially raw ore — back in 2014. A year before the ban kicked in, Indonesia exported around 60 million metric tons of nickel ore. Nickel ore contains an average of 1 to 3.5% of nickel. Indonesia banned exports to encourage downstream investment as this would eventually be better for the country, as it would generate more revenue as the material is processed domestically and it would build a local processing industry. Read more

Indonesia introduced new rules last week that will allow exports of nickel ore and bauxite and concentrates of other minerals under certain conditions in a sweeping policy shift by the key global supplier, Reuters reported.

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A ban on unprocessed ore exports was imposed in 2014 to, the thinking went, encourage investment in mills and smelters in the islands. The government of Southeast Asia’s biggest economy has faced a hefty budget deficit since and missed its 2016 revenue target by $17.6 billion.

The resumption of shipments may have been drafted to help stop the gap.

The new regulations, which took effect on Wednesday, sent nickel prices tumbling more than 5% to a four-month low of $9,660 a metric ton before they recovered.

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The rules include broad changes to permit extensions, which may now be applied for up to five years in advance of expiration, as well as new divestment requirements.

Our Stainless MMI fell by two points in December after a mixed performance.

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On the one side, surcharges for 304 and 316 stainless steel rose by 34% and 25% respectively, as the chrome portion of the benchmark jumped month-on-month. The mill-announced price increase, combined with higher surcharges, marks the largest month-on-month increase seen in recent history.

On the other hand, nickel prices retraced in December on profit-taking across the industrial metals complex. Nickel prices are now at attractive levels wherein we could see investors pushing prices back up. That will depend on upcoming news that will either boost them or send prices lower. One thing is for sure: volatility is guaranteed in the weeks ahead.

Will Indonesia Relax its Export Ban?

Indonesia banned raw ore exports in 2014 to stop mineral wealth disappearing overseas. The country was the top supplier of nickel ore to China for use in (nickel pig-iron) stainless steel before the export ban. Indonesia hoped that the band would encourage smelter investment, but investments haven’t exactly progressed as quickly as expected.

In recent months, rumors are that the Indonesian government is relaxing its export ban. In October, Luhut Pandjaitan, Indonesia’s then-acting mining minister, said that Indonesia was reviewing its mining rules and that the country could could give companies up to five more years to build smelters, and reopen exports of nickel ore banned since 2014. However, soon after he was quoted saying Indonesia would “almost definitely” keep in place a ban on nickel ore and bauxite exports. Which is it?

Many smelters were hoping that they could temporarily export ore to raise funds for downstream investment. Nobody knows what Indonesian’s final decision will be, but the consensus in the market now seems to be shifting towards Indonesia permitting some exports. This fear might explain why nickel prices haven’t really picked up like metals such as zinc or tin.

Others think that there won’t be any relaxation of exports of nickel ore and bauxite. Investors have already spent billions of dollars on smelters in Indonesia. Easing the ban would risk risk flooding the overseas market and undermining prices. Those investors wouldn’t be very happy about that, as it would contradict promises by the nation’s president.

I personally think it would be an unwise move to ease the ban but any outcome is still possible. Stainless buyers need to keep in mind that a relaxation of the ban could put downward pressure on nickel prices while Indonesia keeping the ban in place would have the opposite effect.

Filipino supply

When Indonesia introduced the ban in 2014, the Philippines ramped up production to fill the gap, but the country’s mining industry is now facing a raft of closures for environmental reasons. The Philippines and the still relatively new Duterte administration have already halted the operation of 10 mines and another 20 face suspension.

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Before the month ends, the country is expected to determine which of these 20 mines will be suspended. Last month, Environment and Natural Resources Secretary Regina Lopez was confident that more mines will be suspended.

What This Means For Metal Buyers

Nickel prices fell in December but remember that the overall sentiment in the metals complex is still bullish. If Indonesia keeps its export ban in place and The Philippines suspend more mines, investors will significantly lift prices from current levels.

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