Nickel - the metal for 2007?

[michael_selway]

Oh, some facts might help:
The bull market began for nickel on September 23, 2002 when the price of nickel stood at $2.87/lb.
The first upturn lasted nearly 15 months; nickel closed at $8.01/lb on January 7, 2004.
This was followed by a retreat that ended four months later when, on May 18th, 2004, nickel closed at $4.79/lb.
A further short rally lasting 2 months saw nickel close at $7.23/lb on July 7. Two months later nickel fall back to $5.46/lb on September 9th.
Another burst north saw nickel close at $7.53/lb on October 8, 2004: It fell more dramatically, closing at $5.79/lb just 3 weeks later on the 26th October.
Consolidation concurrent with uptrend lasted nearly eight months, seeing nickel peaking on June 3, 2005 at $7.58/lb.
Five months later it hit a low of $5.24/lb on November 3, 2005.
On May 26th, when nickel closed at $10.43/lb, some pundits have nickel pegged at its cyclical high.
But not me.
Before the year is out we should claim a plus $11/lb figure which I round off to a $25,000/tonne number for good measure.

Yep Nickel price has been up generally over recent yrs although VERY volatile as mentioned above, unlike the other basemetals.

But 1 crucial point is LME supplies have been lower than current levels but prices were much lower?

imo the market is too small so thus speculative? have to buy it when it dips to be safer?



Also need to look at forecast demand and supply.

thx

MS

 

[michael_selway]

http://metalsplace.com/metalsnews/?a=5723

Nickel market in 6,000 tons surplus in Jan-Apr 06 – WBMS
Source: Dow Jones



See also
Nickel Board
Nickel CatalogThe nickel market recorded a small deficit of 6,000 metric tons in the first four months of 2006, with reported stocks some 9,000 tons lower, according to data released Thursday by the World Bureau of Metal Statistics, or WBMS.

Mine production rose by 1.2% to 426,000 tons, with increased Canadian output levels accounting for most of the change.

Refined nickel production rose by 3.6% to 447,000 tons, with small increases in Russian and Canadian output and the reemergence of the Philippines as a producer accounting for most of the rise, WBMS said.

In April, world nickel production was 114,100 tons and demand totaled 120,900 tons.

thx

MS

 

[rederob]

Peter Goudie, Inco's executive vice president of marketing, said the nickel market "continues to outpace expectations", and he forecasts a very strong market for the remainder of 2006.

"Previously we forecast a supply deficit of 5,000 to 20,000 tonnes for the full year," Goudie said. "We are now increasing our deficit projection for 2006 to 30,000 tonnes. Meanwhile, a number of key indicators show that nickel demand should remain robust through the remainder of the year."

Inco also noted that stainless steel inventories are at low levels globally, stainless steel production across all regions has been stronger than anticipated and nickel inventories are falling rather than rising, making the scrap stainless steel market very tight.

"All the key facts add up to a strong second half for nickel," Goudie noted.

From: http://www.chron.com/disp/story.mpl/ap/fn/3992050.html

 

[michael_selway]

From: http://www.chron.com/disp/story.mpl/ap/fn/3992050.html

http://www.fnarena.com/index2.cfm?type=dsp_newsitem&n=0F22D0B2-17A4-1130-F5BE9E86B3EF5E2A

By Chris ShawDo increased global interest rate expectations spell bad news for demand for (and thus prices of) commodities?

According to JP Morgan the answer depends on what commodity you are referring to, as in the broker's view the outlook for gold remains very positive. The broker believes, however, the story for base metals is different.

Its negative view on the base metals is based on the likelihood of slowing demand growth, thanks to a combination of weaker US growth and the impact of demand destruction thanks to higher commodity prices.

Supporting the broker's view is the recent downturn in its Global Purchasing Managers Index (PMI), which historically has provided a good guide for Global Industrial Production, which in turn has provided a good guide to the direction of metal prices.

The broker notes while growth in China continues to be strong it is not being supported by other regions, as G3 growth appears to be slowing in response to ongoing central bank tightening. The US economy is also giving an early indication base metal demand may fall, as the broker notes both the auto and housing sectors, which require large amounts of various metals, are showing signs of turning down.

Not helping is the emergence of inflation, as while an inflationary environment is good for metal prices, the move to higher interest rates to counter the trend is likely to slow economic growth globally, in turn reducing demand for the metals themselves.

Believers in the "Supercycle" thesis can point to low inventory levels as supportive for prices going forward, but the broker is not convinced of such an argument. Nickel provides an example, as the broker notes the price has moved lower in recent weeks even though LME stockpiles have also fallen.

JP Morgan explains this by noting the lower official stockpiles are simply a reflection of re-stocking by stainless steel producers, meaning supply is not as tight as official figures make it appear. The broker expects supply to increase by 4-5% as new projects come on stream, an amount enough to match demand growth and so reduce the potential for price increases thanks to a tightening in the market.

Leading nickel producer Inco last week issued a bullish outlook on the sector, but the company's assessments have met sheer skepticism in the market, including from the likes of Citigroup analysts Alan Heap, a proud promoter of the Super Cycle thesis.Inco said its revised global market balances feature a 30kt supply deficit for 2006. Heap's forecast is for a 30kt surplus for 2006, to be followed by a 8kt deficit in 2007.

However, Citigroup's resources expert also believes the primary driver of the nickel price is not its fundamentals, but the nature of ongoing aggressive speculative activity.

In contrast to the (potentially) worsening demand environment for the base metals, JP Morgan believes the gold market outlook continues to improve. Demand continues to strengthen (even if only for one-off events such as the establishment of gold Exchange Traded Funds or ETFs), but this stronger demand is not being met by higher supply thanks to declining production from South Africa in particular. This means central bank selling is required to meet the shortfall, but the quantity of this selling is limited under agreements in place between the banks.

At the same time, the broker takes the view demand could increase further if there continues to be concerns over the future direction of the US dollar, as a weaker greenback is often associated with higher gold buying as investors chase a safe haven. There has also been significant talk over the past year or so of holders of substantial amounts of US dollar foreign reserves looking to diversify their holdings, with gold given as a possible alternative.

The final point in gold's favour is the market is characterised by less significant swings in inventory than occur in the base metal markets, particularly as gold is generally very widely held. This contrasts with the base metal markets, where speculators have been regarded as responsible not only for pushing prices higher but in accentuating the recent falls as they reduce their positions.

Commodity specialists at Barclays Capital flagged over the weekend they were likely to reduce price forecasts for base metals following the decision by Barclays economists to increase their US interest rate forecasts.Barclays remains confident regarding its price forecasts for energy and agricultural resources.

thx

MS

 

[rederob]

MS
The best possible news is that the news is not as good as it could be.
Bull markets get overbought and need to come off the boil: That's happening now in the base metals.
Your above story could be found in many forms, over many months, a year ago - the prognosis going forward was for lower prices, they kept saying.
Well, here we are in mid-2006 after a mother of a correction and prices remain significantly higher than at any time in 2005.
I said a year ago (in other forums) that the pundits needed to get out of their US-centric views and look towards Asia, Brazil and Russia for internal/organic growth. These places are indulging in "nation building", are desirous of western standards, and have increasingly rapid per capita income growth.

Nickel remains in better shape in 2006 than it ever was in 2005, as this time last year inventories were rising steadily and drawdowns had dwindled to a mere trickle. The stainless steel market was also faced with surplus metal and going into 2006 the picture was not good.
However, in tight markets it takes very little to turn them - one way or the other - as we have recently learned.
I believe too many folk want the exuberance of base metals to continue almost unimpeded. That's plain silly. I am bullish on nickel, but see a platform in the $17,000/$18,000 range as more desirable now than a figure over $20,000.
Markets need time to pass on cost increases. If the costs can't be passed on because they come too soon after previous price increases, the market collapses back on itself.
A little patience and a decent period of consolidation is needed for nickel to maintain ground over $20,000 in the months ahead.

 

[markrmau]

http://za.today.reuters.com/news/ne...6_RTRIDST_0_OZABS-MARKETS-METALS-20060626.XML

LONDON (Reuters) - Nickel gained 2.1 percent in London after Phelps Dodge announced a $40 billion buyout for two Canadian miners on Monday, suggesting that the company believes metals prices will stay high in the longer term, analysts said.

Phelps Dodge said it would acquire Inco and Falconbridge in a deal to form the world's largest nickel and second largest copper producer.

"From the price they are prepared to pay, you have to infer that Phelps Dodge believe that (metals) prices will stay strong. It's the only way they can justify these sorts of numbers," a London mining analyst said.

 

[markrmau]

Nickel's rate of drawdown will be sending alarm bells through the metals market: There is no doubt that it is the "metal for the moment" rather than for the year.

Looks like you're right here. Spot Ni is almost 10% above the may 'bubble' now. Who knows where it will end?

 

[YOUNG_TRADER]

Amazing spots being acheived!

I am curious though as to other peoples views,

On the one hand while I see the lack of Supply as a support for Nickel, I note that stock piles have actually increased somewhat since they hit that dangerously low 7kt level last year, could it be that is the funds driving it based on speculation? ? ?



Also an interesting article

http://www.fnarena.com/index2.cfm?type=dsp_newsitem&n=5587CB36-17A4-1130-F53667C0E60C4890



To make it a little clearer, its just Nickel Stocks are not at say 5 yr lows, yet only now are their prices at record highs, so does that mean fund speculation now exagerating the supply side risks or is it a new shift, ie an acceptance that Nickel Inventories won't reach acceptable levels for some time to come? ? ? ? ? ?

 

[michael_selway]

Amazing spots being acheived!

I am curious though as to other peoples views,

On the one hand while I see the lack of Supply as a support for Nickel, I note that stock piles have actually increased somewhat since they hit that dangerously low 7kt level last year, could it be that is the funds driving it based on speculation? ? ?

Also an interesting article

http://www.fnarena.com/index2.cfm?type=dsp_newsitem&n=5587CB36-17A4-1130-F53667C0E60C4890

To make it a little clearer, its just Nickel Stocks are not at say 5 yr lows, yet only now are their prices at record highs, so does that mean fund speculation now exagerating the supply side risks or is it a new shift, ie an acceptance that Nickel Inventories won't reach acceptable levels for some time to come? ? ? ? ? ?

Yeah i agree, certainly some speculation in the Nickel Price atm, and additionals to live warrants usually come in pretty thick and fast

One has to be becareful when chasing "breakouts"

Nickel Price Pullback A Possibility
FN Arena News - July 10 2006

By Greg Peel

It is the nature of the great Chinese production explosion that it constantly runs ahead of itself. Producers are falling over themselves to tap into the economic dream, and the banks have no qualms in handing out the money. Such it is that stainless steel production becomes unnecessarily excessive.

The Chinese thus face a problem of oversupply of stainless steel. This then has ramifications across Europe and other stainless steel producing areas. But nickel, a major ingredient in stainless steel, is in tight supply. Hence the nickel cost is outweighing the economics of stainless steel sales.

What to do? The best thing is to cut production of stainless steel for the time being. This will allow nickel stocks to rebuild and stainless steel stocks to run down. The price of the former should fall and the latter should rise and then everyone can get back to business. At least, that is, until it happens all over again.

And so it has come to pass. The three biggest Chinese stainless steel producers have agreed to cut output this month by 20%. Exactly the same thing happened in the second half of last year. When it did, the nickel price fell 35%.

Merrill Lynch points out that last year Nickel stocks rose 600% from 5kt to 37kt between June and January. Given the factories close for the summer hols anyway, it was just a matter of extended leave.

Merrills is not advocating a nickel price catastrophe. However, with nickel hitting an all-time high of US$11.29/lb, there is clear downside risk.

Nickel stocks have reached pretty much exactly the same point (less than 7kt) as last year. If the script is followed, a price fall looks likely. UBS, however, is currently suggesting that both nickel and zinc look very strong for the rest of the year, with low nickel inventories cited as the reason for bullishness.

It is unclear whether UBS wrote its report before or after the Chinese production cut announcement.

Merrills is also bullish, in the longer term, as it expects deficits to continue for the next two years.

thx

MS

 

[rederob]

Nickel in the immediate term is likely to do a "copper" - ie, keep rising despite being seriously overbought.
I targeted a $25k price but suspect even $27k is possible on an intraday spike before a sharp pullback, and it will be very sharp.
Remember, nickel is over 70% in the month to date so we are stretching the rubber band extremely tightly at the moment.
For newcomers to base metals, we should be in a relatively quiet trading period at the moment, being the northern summer - traders don't need to restock until holidays are over and it's "business as usual" (from later in August).
The fact that nickel drawdowns are running at near record levels and cancelled warrant ratios have been consistently over 30% for weeks (presently almost 50%) suggests there simply is no spare metal around.
If there was spare metal, cancellations would dry up: They have actually gathered pace with nickel prices at all time contract highs.
In fundamental terms we are facing a near term supply squeeze and the technicals have been concurrently supporting the metal's price.
Although I expect an extremely sharp pullback in the next week or so, I presently foresee no reason why nickel will not return to record prices levels once the speculators have been shaken out and consumers are forced to re-enter the market to obtain scarce materials.
Anyone trying to compare nickel prices with nickel equities will notice that the equities have already factored in the pullback.
So when the pullback does occur and equity prices have bottomed, a great trading opportunity will present itself.

 

[rederob]

The maths:
One tonne equals 2,204 pounds
So below price a little while ago from Kitco placed nickel at a touch over $26,500/tonne:

 

[YOUNG_TRADER]

Nickel Advances in London for a 10th Day as Stockpiles Shrink
July 11 (Bloomberg) -- Nickel gained for a 10th consecutive day in London as stockpiles of the metal that's mostly used to make stainless steel dropped.

Inventories of nickel monitored by the London Metal Exchange fell 486 metric tons, or 5.5 percent, to 8,418 tons today. Stocks have declined 76 percent this year to the lowest since Aug. 23. Credit Suisse Group said last month in a report that nickel demand in 2006 will beat production by 15,000 tons.

``The fundamentals are pretty good, certainly for nickel,'' said Robin Bhar, a London-based analyst at UBS Ltd. ``There's fear that the market doesn't have enough stocks.''

Nickel for delivery in three months on the LME rose $600, or 2.4 percent, to $25,250 a ton as of 11:13 a.m. local time, the highest since at least 1987. The metal has gained 87 percent this year.

Nickel prices gained as strengthening demand, led by surging production of stainless steel in China, exceeds supply, Beijing Antaike Information Development Co., which advises the Chinese government on industry policies, said July 7.

Chinese stainless steel production will rise more than 25 percent to 4.7 million tons this year, boosting demand for nickel by 35,000 tons, or half the projected increase in global demand, Antaike analyst Xu Aidong said in an interview. Global nickel use may rise to 1.33 million tons this year from 1.26 million tons last year, she said.

Copper also rose on the LME, gaining $133 to $7,888 a ton, helped by falling inventories and speculation that global supply may be disrupted by a threatened strike at Escondida, the world's biggest mine for the metal in Chile.

Inventory Drops

The ``lack of inventory is on the bullish side,'' said John Kemp, a London-based analyst at Sempra Metals.

Lead added $30 to $1,110, tin advanced $100 to $8,825, zinc gained $65 to $3,570 and aluminum rose $35 to $2,600.

Alcoa Inc., the world's biggest aluminum maker, said yesterday second-quarter profit surged 62 percent to a record $744 million on higher prices and demand.

Aluminum prices at Alcoa's smelters rose 38 percent on average in the quarter as demand rose from makers of aircraft, building materials and drink cans. Aluminum production rose 1.7 percent to 882,000 tons from the first quarter as Alcoa's expanded Alumar smelter in Sao Luis, Brazil, started production in March. The smelter will boost output by about 50,000 metric tons this year, Alcoa has said.

Alcoa is also investing in smelters outside the U.S., including in Iceland, because Chief Executive Officer Alain Belda expects worldwide aluminum demand to double by 2020. By then,

``China continues to be short,'' said Belda. ``They will be short aluminum and alumina for the year, and I think it will be in that condition through 2006, 2007, probably 2008, also.''

The average price of aluminum on the LME rose 50 percent from a year earlier and reached a 19-year high of $3,310 a ton in May.


And it looks like good ol George Bush is adding to the Supply Side constraints

Bush plan targets Cuban nickel
ALAN FREEMAN

Globe and Mail Update

WASHINGTON ”” The Bush administration vowed Monday to crack down on nickel exports from Cuba, at least half of which are accounted for by Canada's Sherritt International Corp., alleging that the money from the sales is being “diverted to maintain the regime's repressive security apparatus.”

But Sherritt's chairman, Ian Delaney, immediately labelled the proposed actions as “nothing new” and said that the continuing U.S. embargo on the Communist nation is simply “nonsense.”



Nickel recorded new record highs on the London Metal Exchange (LME) on Tuesday, supported by critically low stocks, and copper also rose, underpinned by threats to supply and strong sentiment towards metals.

"The metals all look pretty steady, with nickel and copper at the top end of their range, well supported by strong demand," an LME trader said.

"Nickel saw another stock draw and the metal is certainly in demand, giving it more room to easily go higher," he added.

LME nickel touched a new peak of $25 250 per ton after closing at $24 650 on Monday.

By 1027 GMT nickel was indicated at $25 100.

Stocks in LME warehouses fell again on Tuesday, down by 486 tons to 8 418, their lowest since August 2005, which was reflected in the premium for cash nickel over the three-months price widening to $1 900. On May 11 it was at $475.

Demand looked strong with Chinese stainless steel mills, major users of nickel, boosting production, traders said.

"In the short term expect the metals to continue to erode overhead supply, which should lead to further strength in the days ahead," William Adams at Basemetals.com said in a report.

On the supply side, the Nonoc mine in the Philippines, with capacity to produce 41 000 tons of nickel annually, might be revived by 2008 under a new debt accord arranged by China's Jinchuan Group Ltd., the Philippine government and mine owner Philinico Industrial Corp.

 

[rederob]

But wait, there's more (leaving LME warehouses every minute!)
Below is table of LME exchange warehouse movements of nickel:

 

[michael_selway]

But wait, there's more (leaving LME warehouses every minute!)
Below is table of LME exchange warehouse movements of nickel:

Hehe maybe we should ring up our superfunds to buy the remaining "on warrants"

Btw do u know what the lowerst LME supply ever recorded for Nickel was and when?

thx

MS

 

[YOUNG_TRADER]

OMG up almost 8%, reached a peak of $12.25, currently at $12.19


Nickel ¬ Jul 11, 10:08
Bid/Ask 12.1979 - 12.2205
Change +0.8520 +7.51%
Low/High 11.3005 - 12.2546

 

[markrmau]

Clear example of listening to what the market is telling you, rather than listening to analysts who gab on about metal substitution and stainless plants cutting production etc.

The market is telling us that there isn't enough nickel supply to meet demand. Simple as that.

 

[YOUNG_TRADER]

Agree Mark, but I'm a bit more cautious last year when Chinese Steel Mills reduced steel output in the second half we saw a huge increase in Nickel Stocks huge!!!!! From like 6,000t's to 36,000t's in 6 months, so I am far more cautious of Nickel as it has in the past been far more volatile,

Good news I wouldn't expect the price to drop below $20,000 t which is excellent news for all Nickel Companies

 

[michael_selway]

The market is telling us that there isn't enough nickel supply to meet demand. Simple as that.

Thsi is quite misleading

The most important thing is the true underlying and future demand and supply for Nickel

LME Nickel price (warehouse stocks) = demand/supply + specualation

http://www.fnarena.com/index2.cfm?type=dsp_newsitem&n=5FB07352-17A4-1130-F5189CB5B9D50F5B

Is Nickel In A Bubble?
FN Arena News - July 12 2006

By Greg Peel

On Monday FN Arena brought news that China's three biggest stainless steel producers were planning to cut production by 20% in the northern summer due to a high nickel price having wiped out margins. They did this last year, and the nickel price fell 35%.

Nickel has stolen the limelight away from copper and zinc, having been the outstanding performer in the second quarter and kicking off the third in a similar vein. The price is now well above the previous May high, and the correction is all but forgotten.



Is it a bubble? Will it end in tears? Certainly the Chinese factor could well weigh on speculative sentiment. But then it hasn't yet.

The LME nickel price rose 45% in the second quarter and a further 18% this month. From January 1, the nickel price has risen 117% compared to copper's 109% and 77% for the GSCI metals index.

Barclays Capital points out that the nickel price is clearly a reflection of ever-tightening fundamentals. LME stocks have diminished rapidly in 2006 and currently represent only about three days forward cover. There is real concern from producers that they simply won't get the nickel they need.

The stainless steel industry absorbs 70% of all nickel, and globally that industry is firing along. The US has successfully applied five price increases this year, notes Barclays. In Europe there is strong buying interest and longer and longer delivery times. It is only in Asia where momentum is slowing.

Barclays is not talking a price pullback. The analysts note that the nickel price is often considered a lead indicator for other metals, given its leverage to the steel industry. The LME inventories of copper and zinc are also rapidly declining and demand has not abated. Barclays infers that nickel could well drag the other metals up with it.

http://www.fnarena.com/images/news/nickel.jpg

thx

MS

 

[porkpie324]

young trader, a very good post you wrote today on nickel, it seems going by some of your posts on resource stocks u & i are watching similar miners,porkpie

 

[YOUNG_TRADER]

Cheers Porkpie!

Just got back from dinner, omg Nickel is at $27,500 + where will it stop? ?

This correction in Nickel is gonna be nasty