Low nickel price ‘not sustainable’ – by Jim Moodie (Sudbury Star – September 4, 2015)

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

Bring on the monsoon.

It may seem like a strange wish to make from a part of the world that is more likely to get a freak autumn snowfall than a drenching from rain-laden ocean winds, but it could help a domestic mining industry that has been rocked of late by low nickel prices.

“Right now we’re about two-thirds of the way through the peak shipping season for laterite nickel ore from the Phillipines, which is the primary exporter to China,” said Mark Selby, a former Inco executive now heading up Royal Nickel, a Toronto-based junior mining company.

Laterite ore — which Selby describes as “basically soggy dirt sitting at the surface” — is cheaper to mine than the sulphide ore in Sudbury, but complicated to process.

China, which converts it to so-called pig iron once coke is added to it in a furnace, does a brisk trade with laterite providers from the Phillipines and (before an export ban was imposed) Indonesia.

“In October and November, those exports drop off, because the monsoon comes and they can’t ship the ore when it’s too soggy,” said Selby. “So at that time you would hope to see prices move higher, because there’s less supply.”

Selby said another boost in the short term could come “if a couple of the larger operations that are not cash-positive at this time start looking to cut back,” which would also increase demand for nickel.

“There are a few scenarios that could see prices moving higher by year-end,” said Selby.

As of Friday, nickel was selling at just US$4.5 a pound, which is far from robust. In a commodity report issued earlier this week, Scotiabank economist Patricia Mohr characterized the nickel price as “exceptionally weak,” while attributing the decline to “concern over the slowdown in Chinese stainless steel production.”

Along with investor skittishness over China, Selby said a stronger U.S. dollar is also impacting the price of metal commodities.

“In the last five months, we’ve seen a big sell-off right across the board in the commodities market,” he said. “Copper’s down to $2.25/pound, zinc is down to almost 80 cents. So nickel wasn’t immune and was pulled down with the rest of them.”

That has taken a toll on quite a few minor nickel producers, including First Nickel in Sudbury, which filed for bankruptcy last month.

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