Feb 10 (Reuters) – Good things, they say, come to those that wait. Just ask a nickel bull.
The nickel market went on a super-charged rally over the first half of last year, the benchmark London Metal Exchange (LME) three-month price racing up from below $15,000 per tonne to a May high of $21,625.
The trigger was the well-flagged but widely unexpected decision by the Indonesian government to ban the export of unprocessed minerals in January. At the stroke of a presidential pen, China’s massive nickel pig iron (NPI) sector lost its main source of feed.
Great expectations, however, were dashed by reality, specifically a compensatory surge in nickel ore supply from the Philippines.
The subsequent price collapse was as spectacular as the original rally. And here we are again, the London nickel market kicking its heels around the $15,000 level.
But the bull story hasn’t gone away. It has merely been postponed. Nickel is still metal analysts’ favoured upside pick over a two-year time horizon.
So, will this be nickel’s year (again)? Possibly, but there are many moving parts to this bull story and at its core lies one of the least transparent parts of the global industry.
TALKING DIRTY
One thing is for certain. The Indonesian authorities haven’t changed their minds and there has been no lifting of the ban on exports of nickel ore to China.
Flows of material between the two countries have disappeared, bar the odd shipment of what is probably nickel-rich iron ore.
Indonesian production has also shrunk dramatically. The International Nickel Study Group estimates mine production was just 170,000 tonnes in the first 11 months of 2014, compared with 730,000 tonnes in the same period of 2013.
China’s NPI producers have so far survived this drought much better than expected.
It was widely known they had built up significant quantities of stocks prior to the January 2014 ban and that the Philippines could generate some offset for the lost Indonesian production.
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