nickel price

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,” according to Reuters. 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.

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Nickel prices edged up higher to end the year in the futures market following speculators widening their positions.

According to a report from the Economic Times, the spot nickel market is seeing a trend of increased demand from alloy makers and other industries that consume the metal. This has covered up short positions from speculators ahead of monthly figures, influencing nickel futures.

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!

A report from Economic Calendar last week found nickel prices hovering near year-long highs. Closing this year on a positive note can be attributed to a tightening supply chain for the metal.

Writes Donald Levit for the news source: “While the supply side adjustments was the major price driver, an improvement in demand also contributed to the rally. While nickel has soared, continued potential for further supply cutbacks have continued to push the metal higher, and last week news of a potential, major shutdown added even more upside impetus to nickel’s rally.”

Nickel Mine Suspensions Also in Play

The Economic Calendar report also announced the closure of the second-largest nickel miner in the Philippines, pending an appeal. This suspension (as it stands) would have a significant impact on the supply and demand balance for today’s nickel market.

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:

I get it, you are thinking of what you are going to get your family for Christmas. However, Santa is bringing you good opportunities to buy some metals. Don’t miss them.

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Base metals entered a bull market earlier this year. The real driver of this bull market has been the stronger-than-expected Chinese demand. Markets underestimated Beijing’s determination not to disappoint on its growth numbers. Thanks to the country’s increase in infrastructure spending, industrial metal prices are getting a tailwind.

The metals rally particularly extended in November. However, prices don’t just move in a straight line. If they move up quickly, buyers are tempted to take their profits until markets digest those gains. This is normal price action and why we normally see prices moving in a zig-zag. In the second half of December, there’s already been some profit taking and as prices pull back, buyers can find good opportunities to time some purchases. Let’s take a few examples:

Copper

Copper prices could find support soon

Copper prices could find support soon. Source: MetalMiner analysis of Fastmartkets.com.

Almost no analyst was bullish on copper prior to this rally, but it seems that the market now sees the possibility of a market deficit next year as almost no supply is due to come on-stream while demand seems robust.

Copper prices exploded in November. After this stellar rally it was normal to expect some selling pressure. However, if the bulls are still in control, they should come back to support prices soon. If prices start to rebound from these levels, copper buyers will find a good opportunity to buy some volume.

Zinc

Zinc prices pullback near support levels

Zinc prices pullback near support levels. Source: MetalMiner analysis of Fastmarkets.com data.

According to the International Lead and Zinc Supply Group, the global market for refined zinc metal was in deficit by 277,000 metric tons from January to October 2016 with total reported inventories falling by 53,000 mt over the same period. The Group anticipates that global usage in 2016 will exceed production by 349,000 mt and expects the market to remain in a deficit of 280,000 mt next year.

During this year’s rally, zinc buyers had several opportunities to buy forward. Buyers now need to pay close attention to the recent price pull back. If you see a rebound in prices near that support level, that would be a good time to buy some volume.

Lead

Lead prices pullback near support levels

Lead prices pullback near support levels. Source: MetalMiner analysis of Fastmarkets.com data.

Zinc’s cousin, lead, is also retracing near an area where we should see investors coming in to support prices. If this year’s bull market is set to continue, which for now we continue to expect it to do so, lead buyers will find a good opportunity to time their purchases if prices rebound at these levels.

Nickel

Nickel prices pull back near support levels

Nickel prices pull back near support levels. Source: MetalMiner analysis of Fastmarkets.com data.

The Philippines’ output of nickel ore fell 16% in the third quarter from a year earlier, as a result of several mine suspensions due to environmental violations. The country has already stopped work at 10 of its 41 mines, eight of which are nickel mines. 20 More mines, 14 of which mine nickel, could see their licenses suspended.

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In December prices are retracing, but if this uptrend is to continue investors will likely find these levels attractive to buy nickel, lifting prices.

What This Means For Metal Buyers

Once you identify you are in a bull market, buying in the dips is usually a good strategy to satisify some of your metal requirements. As metal prices pull back in December, metal buyers might find good opportunities to time purchases if momentum turns upwards again.

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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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October was a big test for base metals. A month in which a rising dollar would normally bring metal prices down. But, it didn’t.

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This development just proved that bulls are still in control. This bull market, one that we called earlier this year, looks healthy enough to extend into 2017.

Industrial metals etf hits new highs despite a strong dollar. Source: MetalMiner analysis of stockcharts.com data

The industrial metals ETF hits new highs despite a strong dollar. Source: MetalMiner analysis of @stockcharts.com data.

Strong Demand

China makes up nearly half of the world’s demand for industrial metals. Chinese demand from infrastructure and construction projects has been robust this year and the release of new manufacturing PMI data confirmed that strong demand. The Caixin manufacturing PMI for October rose to 51.2, the highest reading since July 2014 and betting market expectations.

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The automotive industry is also looking strong. In September, Chinese automobile sales rose 27% from the same period last year. This is the seventh consecutive month in which auto sales have risen and the third consecutive month where growth was above 20%. The growth rate this year is substantially higher than last year.

Shrinking Supply

Metals such as zinc, tin and nickel are enjoying a bull narrative of supply shortfall this year. For others like aluminum and lead, the supply deficit isn’t obvious, yet, but the few capacity cuts were enough for bulls to push prices higher in the face of strong demand. Lastly, bulls are even chasing copper. Supply for the red metal hasn’t really shrunk, but the combination of robust demand and the long time needed for new copper projects to move from inception to production is creating perfect conditions for a price squeeze.

Below is a snapshot of the price charts of all the metals traded on the London Metal Exchange. All of them have entered bull territory this year. If you buy any of these metals, you’d be better off having a good hedging strategy, otherwise your budget for 2017 will get hurt.

Aluminum hits a 15-month high

Aluminum hits a 15-month high. Source: @stockcharts.com.

Copper lagged this year but this week hit a 1-year high

Copper lagged this year but hit a one-year high this week.

Nickel rising sharply this month to the highest levels since August 2015

Nickel rose sharply this month to the highest levels since August 2015. Source: @stockcharts.com.

Lead prices at the highest levels since May 2015

Lead prices are at their highest levels since May 2015. Source: @stockcharts.com.

Zinc continues to look strong hitting a 5-year high

Zinc continues to look strong hitting a five-year high. Source: @stockcharts.com.

Tin climbing to a 2-year high

Tin climbs to a two-year high. Source: @stockcharts.com.

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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: