DISCLOSURE: Royal Nickel Corp. paid The Mining Report to conduct, produce and distribute the following interview.
Nickel prices have been weak, but the recent Indonesian government announcement banning ore shipments outside the country may be the shock that reverses the trend. In this interview with The Mining Report, Mark Selby, senior vice president of business development for Royal Nickel Corp., walks through his analysis that indicates nickel price increases and inventory reductions are imminent, while demand continues to grow and over a quarter of global mine supply is shut in.
He considers nickel in 2014 one of the best commodity trades in a generation. To capitalize on this unique set of circumstances, Royal Nickel’s Dumont Nickel Project follows the path of other large-reserve, large-scale mines in the copper and gold sectors that have changed the mining industry and made early investors fortunes.
The Mining Report: The nickel industry has been through tectonic changes in the last 10 years, including large corporate takeovers and fundamental changes in supply available to the market. Can you summarize where the nickel industry has been and where it is going?
Mark Selby: Over the past five years, we’ve seen continued robust growth in nickel demand. Over that period, global nickel demand grew in the high single-digits, while Chinese nickel demand grew at double-digit rates. Stainless steel, which is increasingly used across all sectors of the economy, accounts for approximately 70% of total nickel consumption.
Everyone is familiar with stainless steel appliances like refrigerators, but there are thousands of tons of stainless steel used in less obvious applications in the chemical, manufacturing and service sectors. A good example is just about every fast food outlet in the world, with their expanse of stainless steel counters and food prep equipment used throughout their operations. The nickel is there; it’s just not always easy for consumers to see.
There are a lot of exciting parts to the nickel story. From an economic point of view, one of the most interesting is price: nickel has historically been one of the most expensive of the common base metals (copper, lead, zinc, aluminum, etc.), which has steered its use in high-value applications such as jet engines, gas turbines, nuclear power plants and medical devices. As the Chinese economy moves up the value chain, the per capita consumption of the higher quality nickel alloys is increasing.
In 2010, Chinese per capita consumption of nickel was only one third of the way to German or Japanese consumption levels, which China had already achieved in less value-added materials like carbon steel. Over this decade, we expect China to add at least a million tons more nickel demand as the economy continues on the path of industrialization.
There has been a lot of talk of a slowdown in the Chinese economy over the past few years. However, over that same timeframe, the Chinese nickel demand annual growth rate was in the mid-teens and added over 100,000 tons of nickel demand growth every year. No matter how you look at it, the demand side of the nickel story is robust. We don’t see any reasons why that will change in the near future.
TMR: Can you discuss the evolution of the supply situation in the nickel market? I am especially interested in the role of Indonesian ore and politics on nickel in the future.
For the rest of this interview, click here: http://www.theaureport.com/pub/na/royal-nickel-corp-indonesian-ore-export-ban-opens-door-to-the-next-generation-of-nickel-mines