Nickel prices take 'a breather'

'But there is potential for it to spike higher,' analyst says

Nickel chart for 2019. Reuters

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LONDON — Nickel prices clung to five-year highs on Tuesday after Indonesia spurred fears of shortages by banning exports of ore from January.

Indonesia, the world’s biggest nickel ore producer, on Friday brought forward a plan to ban exports by two years to encourage miners to process the metal locally.

Benchmark nickel on the London Metal Exchange (LME) closed 0.4 per cent down at $17,985 a tonne (US $8.1448 a pound), but was still close to its highest since September 2014.

A stronger dollar helped to pressure assets priced in the U.S. currency, such as nickel.

“Nickel is taking a bit of a breather now, but there is potential for it to spike higher if we look back at movements after the last Indo ore ban,” BMO analyst Kash Kamal said.

He said speculation since July that the ban would be brought forward had pushed prices above $15,000 a tonne, which is the marginal cost of production for nickel pig iron.

Prices for the metal used in stainless steel have advanced 10 per cent since then and nearly 70 per cent this year.

Nickel is the key metal mined in Sudbury so higher prices will help mining companies here, especially Vale and Glencore, two of the city’s biggest employers.

Other factors:

DEFICIT: BMO forecasts a nickel deficit of 51,000 tonnes in 2020 and a shortage of 127,000 tonnes in 2021. Capacity in the nickel market is about 14 million tonnes a year.

LANDMARK HIGH: Goldman Sachs expects nickel to reach $20,000 a tonne in three months, its highest since May 2014.

NICKEL SUPPLY: Philippine nickel mining companies are likely to boost ore production when Indonesia bans exports, but may be unable to fill the supply gap.

TRADE WAR: In the latest escalation in the U.S.-China trade war, Beijing lodged a complaint against Washington at the World Trade Organization over U.S. import duties, the Chinese Commerce Ministry said.

The prolonged dispute has sapped demand for metals, hurt global economic growth and pushed China to boost investment and economic incentives to spur economic demand.

CHINA COPPER PREMIUMS: Yangshan copper premiums, paid on top of LME copper prices to import metal into China, are at $77 a tonne, their highest since November 2018.

ROYALTIES: Zambia should keep mineral royalties capped at 7.5 per cent in the 2020 budget to safeguard the mining sector and promote additional investment, the Chamber of Mines said on Tuesday.

OTHER PRICES: Copper fell to a two-year low before recovering some losses to close 0.2 per cent down at $5,610 a tonne. Aluminum shed 0.2 per cent to $1,753, lead lost 1.6 per to $1,990 and zinc eased 1.7 per cent to $2,205, having touched its lowest in three years. Tin was bid 0.6 per cent down at $16,700.

sud.editorial@sunmedia.ca

 

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