nickel price

As my colleague Fouad Egbaria wrote last week, the U.S. administration’s relaxation of the timescale for implementation of sanctions against Rusal has had the effect of taking the panic out of the market. As a result, prices have fallen for several days, not just for aluminum but for other metals that the market feared could face the same threat — most notably nickel, in which Russian oligarch Oleg Deripaska has an interest.

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But the vagaries of Washington policy aside, the underlying fundamentals for the nickel market remain firm.

Global Nickel Production and Usage Projected to Grow This Year

Reuters reports that according to the International Nickel Study Group, world stainless steel melting production rose by 5.8% last year, while projecting that global nickel production and usage is expected to rise to 2.344 million tons (MT) in 2018.

In terms of tonnage, world nickel production is expected to grow from 2.07 MT last year to 2.22 MT this year, while usage is expected to increase from 2.19 MT in 2017 to 2.34 MT in 2018.

As a perspective on fundamentals reasserts itself, the nickel price has recovered, rising back about $14,000 per ton. Demand has remained robust among stainless producers, with production forecast to rise 4% this year to over 52 million tons, while fears remain around supply.

Philippines Industry Aims to Navigate Government Land Regulations

The Philippines was top supplier to China last year, but the government of President Rodrigo Duterte is not letting up on its efforts to curb environmental damage from the extraction industry and threats remain of nickel mining being curtailed.

Nickel Asia, the Philippines’ top nickel ore producer and operator of the only two nickel smelters in the country, is quoted by Reuters as saying it intends to ship 20 million tons of ore this year — up 17% on last year.

But the government is limiting the amount of land miners can develop at any one time in a spur to rehabilitate old workings.

The limits are highly restrictive, amounting to only 100 hectares for mines producing 9 million tons or more, or 162 hectares if the project has a processing plant on site. The biggest of Nickel Asia’s mines covers 5,000 hectares and even the smallest covers 700, so it will be interesting to see if the firm manages the expansion in output it is projecting.

Indonesian Output on the Rise

Output in Indonesia is recovering following a lifting of the 2014 ban. The country has reasserted itself as the No. 1 supplier to China in the first half of this year.

The ban was lifted partly as the country looked to make up for the loss of revenue when exports collapsed and partly as firms invest in the downstream processing the ban was intended to force through.

Further increases in output, however, are limited, and investment in new reserves has been poor, while the nickel price was lower over recent years so the ability of the market to respond to predicted increases in demand from electric car and battery makers is in question.

The Outlook

We could see a growing divergence in nickel prices with standard nickel stainless melting grades remaining firm in the short to medium term, but battery Grade A, high-purity nickel premiums rising strongly if demand materializes as expected.

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Supplies of such high-purity nickel are limited, with only major producers like BHP Billiton, Norilsk Nickel, Vale and Sumitomo able to supply.

MetalMiner’s Stuart Burns touched on the rapid swing back downward for the aluminum price, which surged on news of U.S. sanctions on Russian oligarchs and companies but quickly dropped when the U.S. Treasury opened the door to potential easing of sanctions.

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But aluminum wasn’t the only metal to see its price drop precipitously in the last week.

LME nickel rose 15.8% between April 3 and April 19, from $13,555/mt to $15,700/mt. That surge has reversed, however, in recent days.

From that $15,700/mt mark, the price has dropped 10.7%, down to $14,025/mt as of April 23.

LME nickel price. Source: LME

The nickel price jumped 10% in a single day last week, the Financial Times reported, marking the biggest one-day jump since 2008, on concerns regarding the potential for sanctions to spread to Russian firm Norilsk Nickel.

Norilsk, however, was not among the 12 companies listed in the sanctions announced by the U.S. Treasury April 6.

Nonetheless, with the U.S. Treasury opening the door for the easing of sanctions if Russian oligarch Oleg Deripaska steps down from his role with aluminum giant Rusal — one of the companies listed in the initial sanctions announcement — the price of aluminum and other metals, like nickel, have tracked back down.

Given Rusal’s stake in Norilsk, last week’s fears regarding a potential supply crunch have for now been somewhat allayed. As such, with the Treasury’s softened stance on sanctions, prices have come back down.

On Monday, the Treasury extended the deadline for U.S. individuals to wind down activities with Rusal to Oct. 23.

“RUSAL has felt the impact of U.S. sanctions because of its entanglement with Oleg Deripaska, but the U.S. government is not targeting the hardworking people who depend on RUSAL and its subsidiaries,” Treasury Secretary Steven Mnuchin said in a prepared statement. “RUSAL has approached us to petition for delisting.  Given the impact on our partners and allies, we are issuing a general license extending the maintenance and wind-down period while we consider RUSAL’s petition.”

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At least for now, that’s good news for electric vehicle manufacturers, who are increasingly looking to nickel for use in lithium-ion batteries.

Numerous factors weigh heavily on the base metals and commodity complex: the Chinese copper scrap ban, the Section 232 proclamation on aluminum and steel combined with country-specific exemptions set to expire on May 1, the Section 301 investigation, and multiple strikes at copper and nickel mines to boot. After the turmoil of the first few months of 2018, MetalMiner reviews how base metals and commodities performed during Q1.

Aluminum, copper and nickel on the rise

Aluminum, copper and nickel prices started 2018 weaker than at the end of 2017. The end of 2017 showed a sharp rally for these base metals, following the bullish uptrend that began in the summer of 2017.

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The short-term downtrend sounded alarms as prices dropped significantly, not finding a floor. However, LME prices started to climb at the beginning of April, leaving the downtrend behind.

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LME nickel prices hit $13,200 per ton last Wednesday, the highest level since June 2015 before investors took profits and the price fell back a touch to $12,870 per metric ton.

Prices were led higher by the ShFE, where stock have fallen to 48,920 tons from over 90,000 tons just a year ago — and consumers are worried about a supply squeeze, Reuters reports.

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The Philippines’ ongoing environmental campaign has perpetuated the closure of four key nickel mines in the Zimbales region, according to Wilfredo Moncano, the director or the Philippine mines and geosciences bureau. Moncano said “no extraction, no new mining activities, what’s only allowed is hauling up ores for their stockpiles,” according to Reuters.

The supply squeeze story has been exacerbated by news that Sumitomo Corporation has suspended output from its mine in Madagascar following a cyclone.  Not surprisingly, investment funds are at increased net long positions on the NME and SHFE, with LME positions doubling from early November. LME nickel stocks are still substantial at 368,292 tons, but are down from levels above 470,000 tons in June 2015; however, they’re at double the levels seen in May 2013.

Although nickel prices have pulled back on profit-taking, many are still betting the price could move higher as the market is in deficit. Any supply-side disruption is seen as an opportunity to squeeze supply in the face of continued robust demand.

Nickel supply, however, has picked up.

Current short-term issues accepted, according to Fast Markets, Indonesia had awarded quotas for the export of over 20 million tons of nickel ore after its export ban was relaxed early last year. Only a small portion of this, however, has been shipped. The bulk of 2017 quotas are still to be exported.

The incentive for both miners and authorities is to resolve the current environmental stumbling blocks. Exports are expected to pick up. There should also be nickel pig iron smelters being established in Indonesia in 2018, creating more plentiful NPI availability in the market.

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Under the circumstances, the recent $13,200 price spike may, if not prove to be a peak, at least come to be in the upper range of what will remain a volatile market until supply concerns ease.

The electric vehicles (EVs) market could increase by 3,400% by 2030 compared to 2015 EVs sales, according to the U.S. Department of Energy.

More powerful, reliable and cost-competitive batteries have driven EV growth. Lithium-ion batteries have effectively replaced lead batteries.

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MetalMiner analyzed the usage of base metals in EVs and their price performance this year. The EV boom has driven investor sentiment for these base metals.

Base Metals’ Role in EVs

The infographic below breaks down car parts by type of base metal. Aluminum, nickel, copper and tin serve as the four main base metal “winners” in which the market could expect demand to grow.

Source: MetalMiner analysis of Business Insider data

Aluminum, Copper and Nickel

Of the exchange-traded metals, all three of these base metals commonly have high trading volumes. Copper, in particular, tends to have high trading volume as the market considers it an economic indicator (often referred to by the nickname “Dr. Copper”).

Both aluminum and copper appear in an uptrend, especially since the summer when prices started to rally.

Nickel prices have also seen high volatility due to electric battery demand. This makes sense — if investors consider a metal  “hot,” then volume and transactions may increase. Prices may change based on  this, as they did for nickel.

Source: MetalMiner analysis of FastMarkets

And What About Tin?

Contrary to the other three base metals, tin prices do not look bullish.

Tin plays an important role in EVs, as it is used for electronic solder and batteries. However, tin prices appear both stagnant and weak.

Source: MetalMiner analysis of FastMarkets

Tin’s price momentum has diverged from EV supply/demand fundamentals and the LME price.

EV batteries have evolved toward technologies that include more tin alloys. According to the International Tin Research Institute (ITRI), tin used for batteries increased by 95% in 2016 compared to 2010 data (14,400 tons). Tin mine output has increased in 2017 compared to last year’s data (18% in China, 26% in Indonesia and 7% in Myanmar).

However, the ITRI forecasts a 7,300-ton deficit in 2017. Tin stocks remain low, with only a slight increase in SHFE stocks.

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Current macro indicators support the bullish rally. However, tin prices still seem reluctant to react.

Have investors forgotten about tin?

Judging by the reception for aluminum, copper and nickel, perhaps 2018 will bring tin into the bull party.

Pavel Ignatov/Adobe Stock

This morning in metals news, raw steel production in the U.S. jumped last week, Century Aluminum was down 10.8% on Monday and nickel prices are aided by steel on Tuesday.

U.S. Raw Steel Production Up 9.7%

Raw steel production was up 9.7% year-over-year for the week ending Nov. 18, according to weekly data from the American Iron and Steel Institute (AISI).

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Domestic raw steel production was 1,745,000 net tons while the capability utilization rate was 74.9%. Production for the week ending Nov. 18 was up 0.3% from the previous week, when production was 1,739,000 net tons and the rate of capability utilization was 74.6%.

Century Aluminum Has a Down Monday

Shares of Century Aluminum closed 10.8% lower on Monday, according to an AP report on Madison.com.

The question is, why?

“Market pundits aren’t entirely certain what to make of this development, noting that aluminum stocks may simply have been shifting away from expensive LME warehouses to cheaper warehouses and other countries,” the report states.

Nickel Prices Get a Boost

Steel-dependent nickel got a boost Tuesday, when prices in the Shanghai and London markets saw a jump, Reuters reported.

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The most-traded nickel contract on the Shanghai Futures Exchange was up 1.3% at 94,710 yuan ($14,285) a ton by 0126 GMT, according to Reuters. Meanwhile, three-month LME nickel rose to $11,677 per ton.

The ongoing turmoil over Donald Trump has increased investors’ worries over political stability in the U.S. In addition, investors worry that under these political turbulences, the Trump administration will struggle to implement pro-growth initiatives.

The dollar is one asset that was affected by the news, falling to a 6-month low. Investors have been selling dollars and buying euros as political risks rise in the U.S. and, following the French elections, fall in Europe.

Two-Month Trial: Metal Buying Outlook

Usually, a falling dollar would give a boost to industrial metal prices, but that wasn’t the case here. Precious metals like gold did benefit from a falling dollar, but it didn’t prevent base metals from declining. This is because investors are now focused on what looks like a slow down in China.

Investors were disappointed when China’s Caixin Manufacturing PMI came at 50.3 in April, the lowest reading since September 2016. In addition, as Beijing talks about curbing credit, investors have come to realize that lower funding for the construction of infrastructure projects will hurt demand for industrial metals.

Just about two weeks ago we noticed that commodity markets were getting in trouble. As time goes on, that weakness is spreading out into industrial metals. Some specific metals are holding their value better than others due to their specific supply narrative, but overall we would expect them to move in tandem, as they always do. Here are some charts suggesting that the bull cycle in industrial metals could be ending:

Nickel falls to a 10-month low. Source: MetalMiner analysis of fastmarkets.com data

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Our Stainless MMI lost 3 points in March, essentially losing what it gained in February.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

Industrial metals continued their rally during the first quarter but nickel didn’t fare as well. Prices are still significantly higher than they were one year ago, but investors are now finding little reason to be any more bullish than bearish due to a complex supply narrative.

The Philippines

On March 13, The Philippines’ president Rodrigo Duterte, threatened to stop all mining in the country. Despite the potential for more closures, investors doubted that Duterte would enforce such strict regulations. Duterte still supports Department of the Environment and Natural Resources Secretary Regina Lopez. The Philippines’ mining industry hoped for the Commission on Appointments (CA) to reject Lopez as the Environment secretary in March.

However, lawmakers opted to postpone a decision to confirm or reject Lopez as the head of that department. Further confirmation hearings are expected to take place in May.

 

Most base metals will finish the first quarter up, but nickel is one of those exceptions to the rule.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

The metal has traded up and down to finish the first quarter close to flat. Nickel prices are significantly higher than they were one year ago and traders are now finding little reason to be any more bullish than bearish due to a mix of news that helps both positions.

Nickel prices finish Q1 close to flat. Source: Fastmarkets.com.

Philippines Threatens to Stop All Mining

On March 13, The Philippines’ president Rodrigo Duterte “threatened to stop all mining in the country,” according to an article in Economic Calendar, while reiterating his support for Department of the Environment and Natural Resources Secretary Regina Lopez. Philippine lawmakers recently opted to postpone a decision to confirm or reject the ardent environmentalist as the head of the department. Further confirmation hearings are expected to take place in May. The country’s miners hope Duterte won’t reappoint Lopez and instead find someone more moderate.

Indonesia to Restart Exports

Despite additional closures last month and the potential for more, nickel prices fell this month. It could be that traders doubt that Duterte will enforce such strict regulations, but it also has to do with fears that the “resumption of exports from Indonesia will compensate” for any supply shortfall in The Philippines, according to Economic Calendar. Read more

Last week, the Philippines’ mining industry “expressed its confidence that the Commission on Appointments (CA) will reject Gina Lopez as the Environment secretary,” according to Philstar.com, since she was unable to win the committee members over. Lopez is among “just a few of President Rodrigo Duterte’s appointees yet to be confirmed by lawmakers,” according to a Reuters article. Nickel prices fell 10% as bears believe there will be a rejection.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

Nickel’s bull market started when Duterte became president of the Philippines in June. Prices gained throughout the year as Lopez led an environmental crackdown on the Philippine mining industry.

Developments in the nickel industry. Source: Raul De Frutos/MetalMiner analysis of LME data.

“The Philippines is the top nickel ore exporter and Lopez’s approval would probably sustain worries over supply disruptions that could lift global prices” this year, according to Reuters. On the other hand, a rejection would give miners a key win in the battle against environmentalists, adding pressure to nickel prices.

Two-Month Trial: Metal Buying Outlook

President Duterte continues to throw support to Lopez, but at the same time he is hoping for a happy compromise between environmentalists and the mining industry, amid rising concerns over job and revenue losses. Read more