nickel
Carsten Reisinger/Adobe Stock

Carsten Reisinger/Adobe Stock.

This week, support from rising alloy-maker demand in domestic spot markets and a supporting trend overseas combined to move nickel prices up slightly.

Just another notch in the 2016 trend of industrial metal prices growing, nickel prices have climbed roughly 45% since the start of the year, according to a report earlier this month from The Wall Street Journal.

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To begin November, three-month nickel prices on the London Metal Exchange were up 4.5% with copper futures climbing 1.5% at the same time.

Prior to the election earlier this month, rumors were swirling that the Federal Bureau of Investigation had new evidence that could warrant charges against U.S. presidential candidate Hillary Clinton. This development contributed to the risk appetite in nickel, copper and other base metals.

“Metals including copper and aluminum are likely to take their immediate price direction from the U.S. elections,” Helen Lau, analyst with Argonaut Research, told the WSJ. “The controversy over Clinton’s email use seems to have closed.”

Buying Nickel and Other Industrial Metals in a Bull Market

Now that the presidential election has been decided, we look ahead to 2017 and where this seemingly bull market will take us. Our own Raul de Frutos wrote recently that nickel saw two price consolidations in 2016 with both combining with the bullish sentiment across all industrial metals. In addition, a bullish narrative of supply shortfall in the nickel industry signaled an ideal time to purchase large quantities of the metal.

How will nickel and base metals fare for the remainder of 2016 and into 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:

 

 

Our Stainless MMI inched up 2% in October. However, it was at the beginning of November when prices surged. Three-month London Metal Exchange nickel jumped above $11,000/mt, the highest level since August 2015. By the way, we predicted this move just a few weeks ago.

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Robust Chinese demand for nickel and other metals has broadly supported a price rebound from multiyear lows that were hit earlier this year. Not only nickel, but the whole metal complex is hitting new highs. When investors turn bullish in the metal sector, any bullish news can make the individual metal increase in price and, nickel is particularly enjoying a bull narrative.

Bullish Industry Fundamentals

First, Indonesia recently announced that the country will “almost definitely” keep in place a ban on nickel ore and bauxite exports. Just a few days ago, nickel investors were concerned that Indonesia was considering lifting the ban. Now that those fears have waned, investors seem willing to chase prices higher.

Stainless_Chart_November-2016_FNL

Second, The Philippines announced that it will prolong the ban on new mines, reviewing all environmental permits previously granted to nickel producers. The announcement dashes industry hopes that some restrictions may be lifted following the audit that was finished in August.

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The news come after a quarter of the country’s miners have been closed with another 20 of them under the risk of suspension.

Bullish Price Action

On top of the above, we are seeing a very constructive price action. After nickel jumped 25% from June to August prices rested in a narrow range for the next three months. Despite a strong dollar in October, investors were unwilling to sell nickel. Now that momentum for investing in the industrial metals complex is picking up again, we expect nickel prices to work higher into 2017.

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stainless-nickel-L1Nickel prices remained steady this week, trading in the range of their support and resistance levels, but the future could be an interesting one for the metal.

According to a recent report from the Economic Calendar, a tightening supply chain and increased demand could lend its support to future upside for nickel.

Want a short- and medium-term buying outlook for aluminum, copper, tin, lead, zinc, nickel and several forms of steel? Subscribe to our monthly buying outlook reports!

“There are signs that this year could be finally the turning point for nickel with many expecting the market to be in deficit and so starting the much needed rebalancing process,” Eduard Haegel, asset president of BHP’s Nickel West unit, said at a conference in Perth. “The welcome return to balance over the next few years should see further recovery in nickel prices.”

So far this year, nickel prices have climbed following the Philippines banning several miners due to questionable environmental practices. On the heels of Indonesia’s ban on nickel ore exports, there were concerns this shift in supply would be temporary but both nations have confirmed they will continue their efforts.

Nickel in Line for a Rally?

Our own Raul de Frutos wrote just this week that nickel’s fundamentals favor a move higher, as do their recent consolidation.

“At least both the price action and fundamentals seem to agree with (nickel’s move higher). Buyers should have a good plan in order to protect margins in case of a price increase,” de Frutos wrote.

How will nickel and base metals fare for the remainder of 2016 and into 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:

Most base metals fell this month, pressured by a rising U.S. dollar. Meanwhile, Nickel prices traded almost flat. Why does this matter? This means that despite downward pressure in the metal complex this month, investors are not giving much ground on nickel.

MetalMiner Price Benchmarking: Current and Historical Prices for the Metals You Buy

This price action seems very constructive and chances are that nickel is setting up for a new rally after this consolidation. On top of that, nickel’s fundamentals also favor a move higher:

Nickel prices holding well, setting up for an upside move. Source: MetalMiner analysis of fast markets.com data

Nickel prices are holding well, setting up for an upside move. Source: MetalMiner analysis of Fastmarkets.com data.

First, Indonesia recently announced that the country will “almost definitely” keep in place a ban on nickel ore and bauxite exports. Just a few days ago, nickel investors were concerned that Indonesia was considering lifting the ban. Now that those fears have waned, investors might be more inclined to chase prices higher.

Free Download: The October 2016 MMI Report

Second, The Philippines announced that it will prolong the ban on new mines, reviewing all environmental permits previously granted to nickel producers. The announcement dashes industry hopes that some restrictions may be lifted following the audit that finished in August. The news come after a quarter of the country’s miners have been closed with another 20 of them under the risk of suspension.

What This Means For Nickel Buyers

Nickel prices might be setting up for a move higher. At least both the price action and fundamentals seem to agree with that. Buyers should have a good plan in order to protect margins in case of a price increase.

Allegheny Technologies, Inc. shares tumbled 15% Tuesday after the Pittsburgh-based specialty metals producer reported a larger than expected third quarter loss and missed analyst revenue estimates as well.

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The company lost $530.8 million, or $4.95 per share, vs. a loss of $144.6 million, or $1.35 per share, in the year-ago quarter. Sales fell 7% to $770.5 million. Analysts had expected the company to report an adjusted loss of 10 cents per share and revenue of $822 million.

ATI also announced the permanent closing of the idled Midland stainless steel melt shop and finishing operation in Beaver County, Pa.

It also permanently closed its Bagdad plant in Gilpin, Pa., whichemployed about 225 people. It produced grain-oriented electrical steel prior to the start of the six-month lockout of union workers in August 2015. Midland employed around 250 workers.

“The decision helps provide clarity to some of the people who had hoped that there would be a restart,” ATI spokesman Dan Greenfield said.

In December, the company announced it was mothballing both facilities with the possibility that they would reopen if market conditions for those products improved.

Free Download: The October 2016 MMI Report

Richard Harshman, ATI’s chief executive officer, said that has not happened. He announced the move as part of the company’s third-quarter earnings statement.

Our Stainless MMI rose 4% in September. The complexity and uncertainty of the supply equation is giving support to nickel prices, so far, this year.

Philippines To Close More Mines

Philippine nickel production is down 24% for the first seven months of this year. The Philippines had already suspended eight nickel mines in previous months and more suspensions were expected. On September 27th, the government announced that 20 more of its mines would be suspended for environmental violations.

Stainless_Chart_October-2016_FNL

The suspended mines and those at risk represent nearly 60% of output in the Philippines, the world’s largest producer of nickel ore and top supplier to top buyer China. China’s imports of nickel ore and concentrates from the Philippines fell 21.3% in the first eight months of year to 17.99 million metric tons.The uncertainty surrounding Philippines’s output is the bullish side of nickel’s story.

Indonesia in Play

Meanwhile, it looks like Indonesian production is now in recovery mode. Indonesian supply rose 30% in the first seven months this year. Ferronickel is an intermediate stage product between ore and refined metal, and Indonesian exports of ferronickel to China have surged this year.

MetalMiner Price Benchmarking: Current and Historical Prices for the Metals You Buy

At the same time as refined nickel production in Indonesia is rising, as the popualce wanted, Indonesia is also considering whether to resume raw nickel ore exports. The decision is expected within weeks. Nickel smelters now fear the rule changes as they could weaken nickel prices, especially those companies that make semi-finished and refined metal.

Price Outlook

It’s worth noting that while nickel has performed strongly this year, it’s still well below the levels five years ago when the metal peaked near $29,000/mt. It seems that prices have room on the outside but more tightness is needed in nickel markets.

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Indonesia relaxing the 2014 export ban could add pressure to nickel prices. On the other hand, prices might continue to get a boost while The Philippines keeps on punishing mines that don’t meet environmental standards.

Stainless Markets

The Department of Commerce found that Chinese stainless steel sheet and strip producers illegally dumped — sold at less than fair value — their products in the U.S, assigning a preliminarily dumping margin of 64-77%.

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Finished steel imports into the U.S. were down in August and Indonesia may finally restart shipments of raw ore to other countries, which could bring nickel back to China.

Steel Imports Still Down

Based on preliminary Census Bureau data, the American Iron and Steel Institute reported recently that the U.S. imported a total of 2,989,000 net tons (NT) of steel in August, including 2,307,000 net tons of finished steel. That’s down 8.5% and 6.6%, respectively, vs. July final data.

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Year-to-date, through eight months of 2016, total and finished steel imports are 21,962,000 and 17,601,000 nt, down 22% and 23%, respectively, vs. the same period in 2015. Annualized total and finished steel imports in 2016 would be 32.9 and 26.4 million nt, down 15% and 16%, respectively, vs. 2015, if the current trends hold.

Finished steel import market share was an estimated 25% in August and is estimated at 25% on the year-to-date.

Key finished steel products with a significant import increase in August compared to July are standard pipe (up 33%), wire rod (up 23%), structural pipe and tubing (up 18%) and hot-rolled bars (up 15%).  Tin plate (up 12%) had a significant year-to-date increase vs. the same period in 2015.

Indonesian Mining Rules

Indonesia is finalizing an overhaul of its mining rules that could give companies up to five more years to build smelters, and reopen exports of nickel ore banned since 2014, the country’s mining minister said on Tuesday.

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The proposed changes provide a way around a 2017 deadline for full domestic processing of mineral ore, potentially pushing completion of that aim to 2022, but also possibly undermining investor confidence.

A lighted underground tunnel in a nickel mine

A lighted underground tunnel in a nickel mine.

Nickel price news from the Philippines as the top nickel producer now has three-quarters of its mines reeling from an audit with 20 mines facing suspension and 10 already in suspension, according to a recent report from Bloomberg.

The mines under fire account for 56% of nickel production by value last year, Leo Jasareno, environment undersecretary, told reporters this week, according to Bloomberg.

Want a short- and medium-term buying outlook for aluminum, copper, tin, lead, zinc, nickel and several forms of steel? Subscribe to our monthly buying outlook reports!

“They have to get their act together,” Gina Lopez, environment secretary told the news source. “We cannot allow any mining company to operate and make millions while the people is suffering. That’s against the law.”

Meanwhile, nickel climbed as much as 2% this week on the London Metal Exchange, its peak since Aug. 12.

“The impact, or the potential impact, warrants a premium,” Daniel Hynes, senior commodities strategist at Australia & New Zealand Banking Group Ltd., told the news source, regarding the Philippine mines audit.

Crackdown Boosts Nickel-Ore Prices

In addition to the boost in nickel prices, the Philippine mine shutdowns also highlight worries of how to secure dependable sources of key industrial ores used to make metals, notably in Asia.

“I have no beef against mining, but I am vehemently against what is happening,” Lopez said at a news conference, according to The Wall Street Journal. “There are mining companies that have passed…it can be done.”

How will nickel and base metals fare for the remainder of 2016 and into 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:

 

Nickel prices got a boost on Tuesday after the Philippines announced plans to suspend 20 more mines.

3M Nickel price on the LME. Source: MetalMIner analysis of fastmarkets data

Three-month nickel price on the LME. We recommended hedging back in June. Source: MetalMIner analysis of fastmarkets data.

The country already suspended 10 mines during the third quarter. The Philippines is by far the largest nickel ore supplier to China since Indonesia imposed an export ban for unprocessed material back in 2014. Lower production is already showing up in the numbers. Philippine nickel production is down 24% for the first seven months of this year. This supply deficit will widen as more mines are suspended.

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Combining the previously suspended mines with those in the new announcement, only one fourth of Philippines mines comply with the country’s environmental and mining laws. It’s estimated that this combination accounts for half of the Philippines’ nickel production last year.

What This Means For Metal Buyers

In our Monthly Outlook, we recommended in June buying nickel/stainless forward one-year out. The new shutdowns are likely to further tighten the global nickel market, which could provide another attractive entry point for nickel/stainless buyers to hedge/buy forward again. To catch these opportunities, buyers only need a good a plan.

The Philippines shut down 20 more mines recently, further curtailing nickel exports to China. There’s a chance a major Brazilian iron ore miner will divest some of its assets.

More Filipino Nickel Mines Shut Down

The Philippines has suspended 20 more mines for environmental violations, most of them nickel, a government official said on Tuesday, bringing to 30 the number of mines shuttered.

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The suspended mines account for 55.5% of nickel ore output in the Philippines based on last year’s production, Environment and Natural Resources Undersecretary Leo Jasareno told a news briefing.

Brazilian Iron Ore Miner Looks to Sell

Cia Siderúrgica Nacional SA is considering selling part of its stake in Congonhas Minérios SA, Brazil’s No. 2 iron ore producer, to China Brazil Xinnenghuan International Investment Co., two people familiar with the deal told Reuters on Monday.

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According to the people, the Chinese mill known as CBSteel is interested in buying about 25 percent of Congonhas directly from CSN. They said CSN, as Brazil’s No. 2 listed flat steelmaker is known, would remain in control of the unit, adding that talks are advancing slowly and may not necessarily result in a deal.