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Economists: Forthcoming supply deficit to push nickel prices up

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Dec 30, 2014
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The looming nickel supply deficit has been haunting steel producers since early November, but economists agree that such a predicament is nothing but good news for investors and market players.

Derek Burleton, deputy chief economist and vice president for the TD Bank group, said that it is not the increased demand that would propel nickel prices up next year, but the several quandaries that hit the sector in 2014.

Amongst which is Indonesia’s prohibition of its nickel ore exportation to prioritize its domestic ore processing and to boost its local mining industry.

In his projection, nickel would end up at an average of $15 per pound in 2015, but would tone down at a cheaper price of $10.44 per pound in 2016. He added that this scenario would be a complete opposite for copper, and that it would remain low and flat due to the overabundance of mineral flooding on the market.

The Indonesian ore ban has radically changed the nickel market, as steel-dependent firms from countries like Japan and China were forced to redirect its importation to lower-grade ore suppliers, particularly to the Philippines, the second-largest nickel supplier in the world next to Indonesia.

The Japanese recession has also altered the nickel commerce, specifically when its government introduced several austerity measures in November to prevent more financial losses and possibilities of an extended recession.

Japan is one of the largest nickel consumers in the world, alongside China.

Other economists believe that the Philippines’ decision on following Indonesia’s move would create ongoing speculations amongst investors and market players, which, in turn, would help nickel prices overtake other base metals such as copper, palladium, and titanium.

Patricia Mohr of Scotiabank believes that the global supply and demand balance for nickel can possibly turn from "surplus" to "deficit" by the second quarter of 2015, a prediction contrary to others belief, which is as early as the first quarter of next year.

Nickel, in her calculations, will reach an average price of $10.75 in 2015 and $12.50 in 2015, outlook that is quite similar and closer to that of Burleton.

Nickel has been trading strong since its recent pick up from current slides several months before November. Base metal authority Kitco recorded its spot price at $6.9539 per pound, while its latest trading prices on the London Metal Exchange (LME) remains high at a competitive $15,652 per tonne.

Small mining firms give steel consumers hope

Nickel consumers see new hope on various emerging exploration firms across the globe such as AMR’s Ban Phuc Reserve in Vietnam and Amur Minerals (AIM: AMC)’s Kun Manie Exploration in the Far Eastern Region of Amur-Oblast, Russia.

AMR is now planning to expand its exploration to Song Da rift to double its production in the Vietnamese region.

Amur Minerals Corporation, however, has gained immense industry reputation from investors and market watchers when it first announced its decision to convert its exploration license into a production one in the early months of 2014.

The company’s CEO Robin Young announced on Wednesday that its license application has reached its final stage.

Obtaining authorization from the Russian government would give the firm the green light to commence its drilling on the Kun-Manie Reserve, one of the most promising mining prospects in the world today.


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