Last year, the Indonesian government followed through with its policy of banning iron ore exports to the rest of the world. The base metals market was obviously affected, but none more so than nickel, whose price surged in the London Metal Exchange (LME), and continued climbing throughout the first half of 2014.
A lot of financial experts then said that nickel has become a bullish commodity. It continued to do well in the market, even surpassing the performance of copper. Eventually, China started experiencing the effects of the ban. Despite having a lot of the raw materials in storage, the country had no other choice but to look elsewhere for an alternative supplier. They finally found it in the Philippines. Its iron ore production, although it cannot match that of Indonesia’s in terms of volume and grade, is enough to keep the business running.
The rest of the year saw dramatic events unfold worldwide. The Russia-Ukraine conflict continued to affect thousands of lives as war in the East escalated. Europe and the USA started imposing sanctions upon the Russian government, which greatly affected the ruble. Japan, meanwhile, declared bankruptcy, while employment rates grew in America at the onset of the holidays. In China, demand for iron ore started to decline. Australian miners saw a supply glut, lowering the trade price to $60 per tonne. Oil is also in overabundance in the Middle East.
How does it look for nickel this time around?
A report from Bloomberg predicts an impending nickel deficit amounting to about 40,000 metric tonnes. At the LME, prices continue to climb, with nickel for delivery in three months closing at $15,530 per tonne.
There are also three contending supplier countries to watch out for, which will strive to fill in the shoes that Indonesia has left behind, namely: Russia, the Philippines, and Cuba.
In Russia, MMC Norilsk Nickel (MCX:GMKN) is still performing well. The weak ruble has definitely provided some benefits, one of which is an increase in the mining company’s profit margins. It also helps that it is the largest producer of nickel in the world. That being said, another name that has got everyone excited is Amur Minerals Corporation (OTC: AMMCF). Its stock price hit a 52-week high of $12.75 last December after it received approval of its license application for the Kun-Manie project. Currently, it is undergoing review by Prime Minister Dmitry Medvedev. Once done with the process, exploration and production of the Kun-Manie area would commence. It is said to be one of the top 20 nickel-sulphide projects ever in history, at 120 million tonnes of mineralization.
In the Philippines, all eyes are on Nickel Asia Corporation, who claimed a 400% increase in profit, per a report from GMA News. Efforts to answer China’s needs have propelled production forward. As long the Indonesian ban is in place, the tropical country would continue its role as supplier for the foreseeable future.
Lastly, Barron’s Asia cites Cuba as another possible supplier. It is said that it has nickel reserves amounting to about 7%. The recent changes in the country’s politics might pave the way towards lifting previous sanctions, which might finally allow for improved production.
All of this to say: 2015 is definitely illustrating a very different atmosphere than the last twelve months. Those involved in the nickel market are hoping for a good year ahead.
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Sources:
- http://www.bloomberg.com/news/2015-01-07/copper-drops-to-four-year-low-on-oil-s-decline-economy-concerns.html
- http://www.gmanetwork.com/news/story/374019/economy/companies/nickel-asia-claims-profits-increased-by-400-percent
- http://blogs.barrons.com/asiastocks/2014/12/29/nickel-watch-indonesia-and-philippines-cuba-is-the-wild-card/
