Nickel Market Faces Supply Shock as UBS Sees Risks Next Year (Bloomberg News – October 2, 2016)

About a tenth of the world’s nickel supply is at risk after the Philippines widened a crackdown on miners, raising the chances of prices rallying by another 25 percent through 2017, according to UBS Group AG, which had already billed the metal as one of its favored commodities.

The market is reeling after the Philippine government threatened to close another 14 mines last week, pending responses to an environmental audit. Of 41 operations reviewed — the majority of them nickel-producing — about three-quarters have been halted or told they need to come up to scratch.

That puts 55 percent of Philippine nickel output, or 11 percent of global supply, at risk of exiting the market, according to UBS. Shutdowns raise the chances of nickel reaching $6 a pound, or $13,228 a metric ton, by the end of next year, analyst Daniel Morgan said by phone from Sydney on Friday.

“A supply cut of about 10 percent is a big cut in any commodity market,” he said. “In the short term, there is enough metal out there as a buffer for the next few months, so are the stainless-steel customers anxious? I would say not yet, but they will be in 2017. Our base case is heading toward $6 by the end of 2017 but there is every potential that a rally could go further.”

Nickel is 20 percent higher this year at $10,560 a ton, with the bulk of the gains coming since June, when incoming Philippine President Rodrigo Duterte and his environment secretary, Gina Lopez, vowed to crack down on an industry they say is despoiling the land and threatening the livelihoods of the poor.

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