UBS Makes a Bugle Call for Nickel Bulls on Crackdown, Demand (Bloomberg News – August 15, 2016)

Rising demand, deficits and a crackdown in the Philippines are combining to make nickel one of its most-preferred commodities, according to UBS Group AG, which said the full impact of mine shutdowns in the Southeast Asia nation may be felt only next year when exports fail to ramp up as usual.

The government’s audit of standards in the mining sector is a front-of-mind risk that’s already shut down about 2 percent of world supply, analysts including Daniel Morgan wrote in a note. Ore shipments from the top supplier could fall to 314,000 metric tons next year from 410,000 tons last year, it said.

Nickel has been the best-performing base metal in the second half, rallying to its highest level in a year Aug. 10, on speculation that the Philippine crackdown led by President Rodrigo Duterte will crimp supplies. Prices have also been supported as rising stainless-steel output boosts consumption, the UBS analysts said in the Aug. 12 report.

As Philippine supply usually drops from July to January each year, “the real impact may not be felt until early 2017, when exports fail to ramp up as they normally would,” the analysts said. “Our price forecast is a bullish trajectory and nickel remains one of our most-preferred commodity exposures.”

Nickel rose as much as 0.9 percent to $10,400 a ton on the London Metal Exchange and was at $10,310 at 8:23 a.m. in London. UBS sees prices at $11,023 next year, $13,228 in 2018 and $19,621 by 2020 after the market flipped from a surplus last year to what’s expected to be a run of shortages.

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