Rising nickel prices good for Sudbury – by Ben Leeson (Sudbury Star – May 14, 2014)

The Sudbury Star is the City of Greater Sudbury’s daily newspaper.

World events including an export ban on nickel ore in Indonesia and uncertainty over the political situation in eastern Europe have helped drive up nickel prices, analysts say. Nickel high a two-year high this week, peaking at more than $9.50 per pound on Tuesday.

That’s more than $2 higher than two months ago and about $3.50 higher than six months ago. Terry Ortslan, nickel analyst at TSO and Associates, based in Montreal, said the primary cause of the increase has been changes to mining laws in Indonesia, which previously supplied China with much of its nickel ore to be processed into pig iron, for use in stainless steel.

“China produces more nickel than Canada and (the former Soviet Union) combined,” Ortslan said. The Chinese have relied on deposits in Indonesia, as well as New Caledonia and the Philippines, before the Indonesians announced a ban on nickel ore exports, in an effort to extract more value from its mineral resources, in 2009.

That ban went into effect in mid-January and though there are presidential elections in Indonesia this summer, it’s not expected the next government will change course.

“If the laws are not changed, as a result, Chinese production will drop,” Ortslan said.

In the meantime, producers have been busy securing as much material as possible.

“That has led to some speculation, as well,” said Bryant Dulin, director of operations at MetalPrices.com. “We’re up 45 to 50% (since the start of the year).”

Those changes have been noted by many here in Sudbury, where nickel remains a key component of the local economy.

Though the industry has declined in relative importance, it directly employs some 6,000 in the city, while the supply and service sector employs another 10,000.

Vale is one of the city’s largest employers, at about 4,000. GlencoreXstrata employs more than 1,000.

Indonesia is building its own capacity to refine ore, Dulin said, but that process will take time.

There are more than 40 applications by companies hoping to set up refineries in the country.

“But the problem with Indonesia is it’s a bunch of spaced-out islands,” Dulin said. “And they don’t necessarily have the capacity right now to produce all the electricity for these refineries and they don’t have the infrastructure, as well. So they need to figure all of that out, but in the next year or two, as production ramps up and they start putting out that material from Indonesia, you should see prices come down a little bit.”

Mill demand for nickel remains strong, both in the United States and Europe, added Pete Stavretis, a market specialist at MetalPrices.

Another driver is fear of how sanctions against Russian companies, due to the country’s increasingly aggressive stance toward its neighbour Ukraine, might affect exporters there.

“That also has a huge impact on nickel prices,” Stavretis said. “All three of those factors, together, are contributing to the spike we’re seeing in nickel.”

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