by Greg Klein | October 8, 2015
Investment banker and adviser Alto Capital sees nickel prices almost doubling to at least $9 a pound or about $20,000 a tonne by March 2017, the West Australian reported October 8. Alto research analyst Carey Smith acknowledged the current situation remains “dismal due to a recipe of stockpiles up, production up and demand down.” But, in a presentation to the Paydirt 2015 Australian Nickel Conference in Perth, he noted a dearth of large projects waiting to be developed.
“Going forward, stockpiled Indonesian high-grade laterite nickel in China has all been consumed, China nickel pig iron production is in decline, global nickel supply is decreasing with only Independence Group’s Nova Bollinger project on the horizon and most producers/miners are losing money—so they will minimize their operations and/or get out of the game,” the paper quoted him. “This favours a return to the unrealized 2014 predictions of prices circa plus-$20,000 a tonne.”
October 8 prices had the metal sitting at $4.59 a pound or $10,126 a tonne.
Smith added, “Seven new nickel projects, which had been suffering delays of three to six years, have all completed their ramp-ups and come into production, some at capacity, more or less all at the same time, adding an additional 200,000 tonnes per year. Against this environment, it is difficult to see any new nickel laterite projects being developed over the next decade.”
Chinese stainless steel production “does appear to have flatlined at around 21 to 22 mtpa,” Smith said. Alto estimates that 60% of nickel producers are losing money with output from the sector’s “Big 15” producers dropping about 11% between 2006 and 2014.
There are now very few significant-sized projects waiting to be developed or left in the cupboard. That starts to make the picture look a lot rosier.—Carey Smith,
research analyst with Alto Capital
“However, if you consider that as further declines are forecast over the coming years with a number of projects shutting down/reducing output or being put on care and maintenance, and that the bulk of recent projects that have come onstream were discovered more than 30 years ago, it means there are now very few significant-sized projects waiting to be developed or left in the cupboard. That starts to make the picture look a lot rosier.”
“It is not easy to recognise the bottom of a cycle when you are in it but the bottom is in, and we will look back on this time in a couple of years and say, ‘That was a massive opportunity.’”
Attendees at another nickel conference a day earlier in Lisbon heard forecasts of declining global production from 1.994 million tonnes in 2014 to 1.954 million tonnes this year and 1.942 million tonnes next year. The International Nickel Study Group forecast primary nickel usage rising from last year’s 1.863 million tonnes to 1.905 million tonnes in 2015 and 1.965 million tonnes in 2016.