Scotiabank positive on nickel – coal and uranium at rock bottom – by Dorothy Kosich (Mineweb.com – May 29, 2014)

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As world nickel supplies plunge 20% this year, Pat Mohr forecasts an average nickel price of US$8.30 this year, US$10.75 in 2015, and US$12.50 in 2016.

RENO (MINEWEB) – “Indonesia’s ban on the export of all unprocessed nickel-containing ores will turns today’s world supply & demand balance from ‘surplus’ to ‘deficit’ by early 2015,” says Scotiabank economist Patricia Mohr.

In the latest edition of the Scotiabank Commodity Price Index published Wednesday, Mohr observed that Chinese stainless steel producers’ inventories of Indonesian ore “will largely be depleted by year-end.” As a result, Chinese mills urgently boosted imports of FeNi (nickel & iron) by 70% during the first quarter of this year.

“The strength in Chinese nickel orders is coming at a time of improving stainless steel demand in the United States and signs of firmer stainless orders in Europe,” Mohr said. “This reflects more favorable market conditions in the U.S. auto, heavy truck & transportation sectors and in the energy and chemical processing industries.”

LME nickel prices—important to the Sudbury Basin, Thompson Manitoba, Raglan in northern Quebec and Voisey’s Bay in Newfoundland and Labrador—have surged from a weak US$6.31 per pound early this year to as high as US$9.62 in mid-May, up 52%.

As world mined nickel supplies plunge 20% this year due to the Indonesian nickel ban, Mohr said the nickel price forecast has been revised up to an average of US$8.30 this year, US$10.75 in 2015, and US$12.50 in 2016. “Canada will climb back into No. 3 spot in world nickel production this year, after the Philippines (No. 1, based on ore shipped to China for NPI [Nickel Pig Iron]) and Russia (No. 2),” she predicted.

“The profitability of Canadian nickel mines have shifted from marginal to strength,” she observed, as margins now average roughly 22% over costs including depreciation.

An important by-product of nickel mining in Sudbury, palladium has also jumped by 16% since late 2013, she added.

In her analysis, Mohr observed that Vale’s hydrometallurgical plant at Long Harbour, Newfoundland, which will process Voisey’s Bay concentrates/ore into cathode—a pure nickel product for superalloys in addition to stainless steel—will come on stream later this year at a time of favorable global nickel demand.

“However, the start-up of about 11 ore processing plants making NPI or FeNi in Indonesia (involving Chinese investment) could cap nickel prices by 2016:H1,” she cautioned.

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