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Nickel - the metal for 2007?

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Nickel inventory falls 306mt today, this will pushi nickel price up.

I had suggested my clients to short nickel today if the price rises to $38000 caused by the fall in inventory. Because nobody will be able to catch the price when the result between Xstrata PLC and unionized workers at its Sudbury nickel mine is announced.

This recommendation only applies to investors who believe that nickel price is near the peak already. I'm one of the believer.
 
You'd be a brave person to stay in at the moment:

"Xstrata hasn't returned to the bargaining table today, said Richard Paquin, lead negotiator for the Canadian Auto Workers union. He said he thought an agreement might still be reached by the deadline."

...

"SUDBURY, Ont. (CP) -- Anyone holding their breath over contract talks between Xstrata Nickel, a subsidiary of Xstrata Plc. [LSE:XTA], and Local 598 of the CAW union can take a short breath following news Tuesday that progress is being made toward reaching an agreement.

But it appears the two sides are still apart on critical issues related to job postings, vacations and money.

An issue of vital importance to the union - an assurance that unionized employees will fill mining jobs at the new Nickel Rim South mine when it enters production next year - has been resolved, according to the union."

If they are making progress, I doubt they will strike. Some are forecasting a 20% drop in the nickel price if the strike doesn't go ahead. Just some food for thought...
 

Only one client listen to my advise to short nickel yesterday, since nickel price was pushed up by a big fall in inventory level. I think its a good calculated risk to take.

No strike at Sudbury mine. So expects nickel price to fall tonight at London.

Conclusion, my client made the right bet.
 
Any guesses where the nickel price will end up? The strike is off, it could get nasty.

http://www.theglobeandmail.com/servlet/story/RTGAM.20070201.w2xstrata0201/BNStory/Business/home

http://www.bloomberg.com/apps/news?pid=20602013&sid=aB2DYF5aqo1E&refer=commodity_futures
 
If Sudbury supplies 4 percent of the Worlds Nickle, it would be reasonable to presume this news alone is worth a couple of percent to prices.

If you feel that the timing of Nickles recent run was mainly on the back of an impending strike at Sudbury......it could get nasty.

Personally I feel Nickle is relatively tight as a commodity (Short Term), with the stellar run of Nicklers SP's recently..... a twenty percent drop in SP's......... 'their still 30 percent up from a few weeks back'. No reason to stress IMO.

If you were trading them short term, maybe the highs have passed, still a decent gain will be had in an exit tomoz.

Remember, if you held out till today and took the punt on a Sudbury strike. Imagine how the market would have over reacted to that one short term
 
Well the market didn't over react too much.


By Daniel Magnowski
LONDON (Reuters) - Nickel futures fell 3 percent in early business at the London Metal Exchange on Thursday after a deal to stop a potential strike at the Sudbury, Ontario operations of miner Xstrata (XTA.L: Quote).

Three-months futures <MCU3> traded as low as $35,900 per ton, down $1,200 from its previous closing price, before rebounding to $36,650 by the end of the official session.

The Anglo-Swiss mining firm and the union representing around 1,000 workers reached tentative agreement on a new contract late on Wednesday, narrowly avoiding a strike which would have further tightened supply of the metal

"The focus is back again on dwindling stock levels, off another 600 (tonnes) today, and forcing the market to pare earlier losses caused by the Sudbury settlement," analyst Edward Meir of Man Finacial said in a market report.

"We like the odds of the upside resuming at this stage,"

Traders said the fall in price was predictably short-lived, given the scarcity of metal on the market.

"The news is out there but I don't think many people expected there to be a long strike," one dealer said.

He said demand for metal was strong, and doubted people had been hoarding stocks in case of a strike.

"There are not going to be big deliveries back to warehouses due to this non-event."

At around $36,500, nickel is up $2,000 on the start of the year, but almost $2,500 down from the all-time high it reached last month.


© Reuters 2007. All Rights Reserved.


Nickel Spot price only slightly down ATM, nothing too concerning though
 
Feb. 1 (Bloomberg)

Nickel dropped in London after Xstrata Plc said it reached a ``tentative'' agreement on a new labor contract with workers at a Canadian unit, avoiding a strike that would have affected 4 percent of global supply.

The union represents 1,027 workers at the Sudbury, Ontario, unit and threatened to strike unless agreement was reached by yesterday's deadline. Nickel rose to a record last week on speculation a strike would exacerbate a global supply shortfall.

``The market has been surprised by the last-minute settlement,'' said Kevin Tuohy, a trader at Man Financial Ltd. , one of 11 companies trading on the London Metal Exchange's floor. ``You may see prices down by another $2,000, $3,000,'' he said in an interview.

Nickel for delivery in three months on the LME fell $400, or 1 percent, to $36,600 a metric ton as of 12:28 p.m. local time. It earlier slid as much as 3 percent to $35,900. The metal used in stainless steel traded at a record $38,950 on Jan. 26.

The metal has risen more than sixfold in the past five years on demand from China, which overtook Japan last year as the world's largest stainless-steel producer. Global demand will beat supply by 1,000 tons in 2007, from a deficit of 6,000 tons last year, Daniel Brebner, an analyst at UBS AG, said yesterday in a report.

Nickel's decline wasn't ``massive'' in the context of the metal's historical price movement, Tuohy said. ``That indicates the market is very tight.''

Inventories Slump

Inventories dropped 606 metric tons, or 15 percent, to 3,366 tons, the LME said today in a daily report. That's the largest one-day decline since Aug. 9, 2004. Stockpiles have plunged 91 percent in the past 12 months to their lowest since July 1991. Feb. 1 (Bloomberg) -- Nickel dropped in London after Xstrata Plc said it reached a ``tentative'' agreement on a new labor contract with workers at a Canadian unit, avoiding a strike that would have affected 4 percent of global supply.

The union represents 1,027 workers at the Sudbury, Ontario, unit and threatened to strike unless agreement was reached by yesterday's deadline. Nickel rose to a record last week on speculation a strike would exacerbate a global supply shortfall.

``The market has been surprised by the last-minute settlement,'' said Kevin Tuohy, a trader at Man Financial Ltd. , one of 11 companies trading on the London Metal Exchange's floor. ``You may see prices down by another $2,000, $3,000,'' he said in an interview.

Nickel for delivery in three months on the LME fell $400, or 1 percent, to $36,600 a metric ton as of 12:28 p.m. local time. It earlier slid as much as 3 percent to $35,900. The metal used in stainless steel traded at a record $38,950 on Jan. 26.

The metal has risen more than sixfold in the past five years on demand from China, which overtook Japan last year as the world's largest stainless-steel producer. Global demand will beat supply by 1,000 tons in 2007, from a deficit of 6,000 tons last year, Daniel Brebner, an analyst at UBS AG, said yesterday in a report.

Nickel's decline wasn't ``massive'' in the context of the metal's historical price movement, Tuohy said. ``That indicates the market is very tight.''

Inventories Slump

Inventories dropped 606 metric tons, or 15 percent, to 3,366 tons, the LME said today in a daily report. That's the largest one-day decline since Aug. 9, 2004. Stockpiles have plunged 91 percent in the past 12 months to their lowest since July 1991.

Doesn't look to me like it's time to get out of Nickel yet!
 
Yes, seems like nickel uptrend is unstoppable.

Looking to buy CVRD, the Brazil company that bought over Inco (owns nickel mines). But share price rises too sharply, waiting for a correction.
 
There's an interesting broker report on the mincor website mincor.com.au by Patersons comparing MCR,IGO & SMY which does partiarly explain the recent share prices of these three companies. porkpie
 
markrmau said:
Hope they covered?
Click to expand...

Its ok, they own phyiscal nickel, they are doing it for hedging. And nobody can say for sure that nickel price will not fall next one month.

Though nickel price has risen last Friday, I heard that hedge funds have been shorting nickel slowly. Nickel inventory level has fallen quite a bit lately, I believe this is manipulated by hedge funds (as there is one fund holding more than 90% of nickel inventory at LME early last week). So with funds shorting nickel quietly, and slowly, it might signal that peak of nickel is reaching soon.

$38,500 might be the peak, my guess.
 
One of the few large independent nickel producers still in existence (after WMC and Inco got taken out) is Lionore mining - LIM.AX. Currently trading at a PE of 6 (EPS of $2.21 and SP of $13.33).
 
Nickel February 05,09:02
Bid/Ask 17.9653 - 18.0560
Change -0.2706 -1.48%
Low/High 17.9653 - 18.6442

The beginning of the end of the current run?
 
chops_a_must said:
Nickel February 05,09:02
Bid/Ask 17.9653 - 18.0560
Change -0.2706 -1.48%
Low/High 17.9653 - 18.6442

The beginning of the end of the current run?
Click to expand...

Hi chops,
I'd only be guessing but if Red Kite is in BIG trouble I assume it will need to unwind quite a few of its positions across the market to free up some cash to try to stall its investors. At least with nickel it would be selling into strength. Wouldn't be surprised to see a lot of volatility across the board over the next few weeks with a generally weakening bias, always remembering that they are not the only fund in the market and I am sure a lot of fund investors are getting nervous..... remember that the above is pure uninformed assumptions
 

Red Kite holds a lot of aluminum, this metal could be the next target, just a guess.
 
Bank selling nickel now, pushing down nickel price.

Red Kite holds a lot of aluminum, this metal could be the next target, just a guess
 
This article may be of interest to those who have not read it.

Cheers

Nickel Divides Market Experts

Source: FN Arena News - February 06 2007

Smith Barney Citigroup's commodity specialists pointed out in December the price performance of nickel had simply stunned the market with the spot price reaching 20 year highs and global demand for the metal proving surprisingly resilient.

In line with views held by the majority of market experts, Citigroup flagged in December the year 2007 was likely to bring some relief to steel manufacturers and other end users of the metal. However, thus far, and the January carnage included, nickel has remained on top of the metals class.
It would seem the metal has now created a great divide within the investment community, placing commodity experts at JP Morgan and Deutsche Bank opposite each other.

To JP Morgan all this is simply the prelude to a gigantic correction in a not too distant future. UK based Jon Bergtheil predicted this week: "Nickel's fall will be worse than the pace copper has seen". Bergtheil talks about an "over-inflated" market and investors should better prepare for a price fall in the order of 25% this year ("at least" according to the JPM specialist).
Others are not necessarily on par with the JP Morgan view. At Deutsche Bank, analyst Michael Lewis, has thus far kept the metal as his favourite pick among industrial metals. Lewis maintained in early January producers simply cannot keep up with global demand for the metal.

Interestingly, GSJB Were commodity analyst Malcolm Southwood and his two UK colleagues Paul Gray and Marc Bonter refrained from any comment on the nickel market in their update on metals markets this week. The team took the effort to reiterate its positive view on copper, despite that metal continuing to feel the pain of hedge fund selling.
Meanwhile, last week's main victim of unexpected market selling pressure, zinc, has started to recover from what has already been dubbed "the largest weekly drop in at least 17 years".

Investors can maybe draw solace from a Macquarie update informing the bank's clientele "the zinc market will remain relatively tight in the first half and we expect a bounce in pricing, although not to levels we saw last year".

Again, GSJBW preferred not to comment.
 
February 06, 2007

Talk Of Nickel Substitution Can Be Dismissed

By Our Man In Oz

Substitution is a word used increasingly in debate about the nickel market, if only because some observers cannot accept that a price of US$18 a pound can last long. Popular as the theory is of nickel being replaced in the making of stainless steel by manganese and chrome, the truth is a different matter as China discovered last year when it opted for a lower grade stainless, called in the trade “nickel 200”. That material, which uses between two-and-four per cent nickel, is much cheaper than the next stainless steel grade, nickel 300, which uses between eight-and-10 per cent nickel. The problem, as China discovered to its annoyance, is that in certain applications, such as in air-conditioners, it rusts – which diminishes by a wide margin the concept of a steel being stainless.

Savvy investors will immediately spot the point of that Nickel 101 lecture and perhaps re-think any decision they are about to make such as selling shares in nickel miners because they believe the market has peaked. Essentially, the message is that “steels ain’t steels” and nickel has a guaranteed market because substitutes ain’t what they’re cracked up to be.

For long-term followers of the nickel market, including Minesite’s man in Oz, the Chinese air-conditioning scandal, which saw the “nickel 200” series banned for several months, is a sobering form of re-education. Before hearing about that affair, from Peter Johnston, a man who has forgotten more about nickel than most people have ever learned, Minesite’s correspondent had been naively pursuing a theory that the nickel market was about to pop because the sky-high price had opened the door to substitution.

Not so, said Johnston, chief executive of the Australian nickel producer, Minara Resources. “I think we’ve another good two-to-three years of high prices,” he said. But surely, countered Minesite in its chat with Johnston in his Perth office, one bad experience with Chinese air-conditioners isn’t enough to kill off all forms of substitution. Perhaps not, said Johnston, but there are other factors at work, such as the booming demand for nickel in Europe. At this point Minesite decided it would be better to shut up and listen and stop walking around displaying his ignorance.

Johnston, who cut his teeth in nickel and might be remembered by some London types as chief executive of the gold and nickel division of the old Western Mining Corporation, then took Minesite gently through his thoughts about nickel, some of which might be “talking his Minara book”, but all of which is knowledge distilled over an eventful career which once saw him a favourite for the chief executive’s chair at WMC – and mightn’t mining history have taken a different turn if that had happened.

Before Johnston’s nickel tutorial a brief word on what’s happening in Europe, a place that everyone in Oz has given up as a no-growth region populated by old men and women wearing grey cardigans and chatting in cafés. Europe, as seen through the eyes of a nickel miner, is made up of series of mini-Chinas. How is this so? Because Eastern Europe is undergoing a high-metal consuming phase, like China, as it makes up for time lost in the communist miasma. Poland, Romania, Bulgaria and Hungary might not match the demands of 1.2 billion modernising Chinese – but they’re doing their best which is why the growth rate of the nickel consumption in Europe has risen from an annualised one per cent a year to a very surprising six per cent a year as demand for stainless steel rises rapidly.

Enough of the lecture. This is Johnston’s explanation, and remember he is the man who has run two of the world’s biggest nickel businesses, and is also the man who created the world’s first cobalt and nickel-trading websites. “There was some substitution,” he said. “It was mainly in the nickel 200 series which is the low nickel-bearing stainless. It is very strong in India, but when transferred into China they used it for the wrong applications, air-conditioners and things like that. It actually started to rust. China banned it for a while. But, before they did that, they started selling nickel 200 as scrap, which meant it contaminated the scrap cycle, which also annoyed a few of the steel mills.

“To be fair, nickel 200 will grow. It has a market in things such as pots and pans and other low-intensity applications. It’s not a nickel free material, it’s low nickel and it does have certain applications. It’s no good in food factories, and hand-rails, or marine environments. There are a range of nickel products, which use commodity trading names, there’s nickel 308, 314, 316, and so on. The general product is in the 300 series.”

If, as Johnston says, stainless steels ain’t stainless steels, and nickel demand is as strong as ever, how does that affect his view of the nickel market. “Look, I have to acknowledge that there is always a growing demand for substitution in a period of high prices,” he said. “Customers always look for a cheaper alternative. That can even go as far a stopping the use of stainless steel in architecture and returning to concrete. In every high-priced environment some of that occurs. But the issue with stainless steel is that substitution cannot occur in some of its applications. You still need high quality stainless for milk tankers, you’re not going to make concrete milk tankers” – a point which draws a loud guffaw from Johnston.

“My reading of the market hasn’t changed. I’ve been saying for two years that we’re in a stronger-for-longer period, and I can see another two-to-three years to go. The market fundamentals for nickel are the best for all commodities because of limited new supply, and extraordinarily strong demand out of China. And then there has also been a big increase in stainless demand in Europe. So we really have two markets going for us thanks to the growth we’re seeing in Eastern Europe, which is dragging demand out of the steel mills in places like Germany where they have full order books. They’re in that spend zone where they have to spend a lot on infrastructure”, and that means stainless steel, which means nickel, which means nickel miners etc etc etc, and so on, down the food chain. It helps explain why Minara shares have more than trebled over the past 12 months and Jubilee Mines has not been far behind.
 
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