Investors and industry leaders brace themselves for the fast-approaching supply deficit, especially now that nickel prices remain precarious as the year reaches its end.
On December 19, 2014, nickel traded lower by 0.33% to $15.45 per kg on a shaky trend overseas as speculators trimmed positions. According to experts, nickel’s year-end performance would help influence investors’ perception on the best-performing base metal of 2014. Its recent performances on the London Metal Exchange (LME) have divided investors, especially when it started to experience a gradual decline in price in November.
The forthcoming supply deficit is amongst the much-feared scenarios in the base metal segment, as it could impose significant changes in the industry and force main consumers like China and Japan to look for better alternatives after Indonesia’s exit.
Indonesia was the world’s top nickel ore supplier before its exit on the global stage as part of its localization measures for its nickel processing industry.
Nickel consumers have been importing nickel from different suppliers after the infamous nickel ore ban. After which, the Philippines, the second-largest nickel ore supplier, became the default leader of the nickel ore commerce.
Imports of Chinese raw materials have dropped 25% to 42.4 million tons in the first 10 months of 2014 from 2013, with the Philippine ore responsible for 74% of its totality.
As of today, the Philippine ore remains the top choice as substitute for Indonesian ore of giant steel and nickel dependent companies from highly industrialized counties like Japan, South Korea, and China.
However, nickel is seen to extend its rally into 2015 due to the massive drop of China’s nickel pig iron output amidst declining stockpiles of better raw material.
According to Ian Roper of Singapore-based commodity strategy firm CLSA, nickel will experience resurgence at above $17,600 in June 2015 when all stockpiled Indonesian ore in China are consumed by the end of the second quarter.
China’s nickel pig iron could possibly fall up to 300,000 metrictonnes next year from 410,000 tonnes this year. The Chinese NPI has been declining since 2013, its last best performance in the past three years at 485,000 tonnes.
On the supply end
Small and nascent mining firms have been gaining attention this year as demand rises. Top suppliers are eyeing small firms, as their inclusion to the global commerce would help ease the weakening nickel supply.
Amur Minerals (AIM: AMC), a small Russian firm, is just waiting for the Russian government’s approval of its production license application. Once granted, it would start its drilling in the Kun-Manie reserve, one of the most promising and most abundant nickel reserves in the world today.
In Southeast Asia, AMR’s Ban Phuc nickel mine and plant in Vietnam is becoming one of the alternative sources of nickel in the region.
Ban Phuc has produced 6,400 tonne nickel, 3,200 tonne copper and 200 tonne cobalt as a byproduct. The staggering number is predicted to expand to 9,900 tonnes of nickel equivalent in 2015, as the Canadian company plans to spread out its drilling to the Sang Da Rift region, an area replete with nickel and copper.
