Nickel - the metal for 2007?

[YOUNG_TRADER]

Nickel Climbs for 11th Day as Stockpile Slump Curbs Supplies
July 12 (Bloomberg) -- Nickel rose for an 11th consecutive day in London as inventory declined, curbing supplies of the metal used to make stainless steel.

Stockpiles of nickel monitored by the London Metal Exchange fell 2.1 percent to 8,244 metric tons, the lowest since Aug. 22, the LME said today to a daily report. Inventory has dropped 78 percent this year. Stockpiled nickel may be needed by consumers to compensate for the production shortfall forecast for this year by some analysts.

``Supply concerns are back on the markets' minds for now,'' said Roy Carson, a London-based trader at Triland Metals Ltd., one of 11 companies trading on the floor of the LME. ``The psychology is quite bullish.''

Nickel for delivery in three months on the LME rose $450, or 1.8 percent, to $25,950 a metric ton at 9:47 a.m. London time. Earlier, the metal rose to $26,000, the highest since at least 1987. The metal has gained 91 percent this year.

``Nickel's out on its own,'' said Carson, who added that the metal could rise to between $27,000 and $28,000.

Credit Suisse Group said last month 2006 demand will outpace output by 15,000 tons. LME stockpiles are sufficient for three days of demand, Barclays Capital analysts led by Kevin Norrish said in a report yesterday.

``There are now very real concerns that many consumers will simply not get the nickel they require over the coming months,'' Barclays said.

Among other LME metals, copper gained $230 to $8,140, lead rose $20 to $1,130, zinc added $80 to $3,600 and aluminum advanced $20 to $2,628. Tin was unchanged at $8,900.

 

[YOUNG_TRADER]

SYDNEY, July 13 (Reuters) - High-flying nickel prices -- up 84 percent this year -- may be headed for a crash, taking the share prices of producers down in the process, research group Stock Resource said on Thursday.
Nickel traded on the London Metal Exchange <MNI3> has soared on bets by investors that supplies of the metal, whose widest use is as an alloy in stainless steel used to make beer kegs, will fall short of demand over the the next year or two.

But a view is emerging that high prices will turn some users in China and elsewhere away from nickel and other industrial metals, driving prices down.

"The spot nickel price is currently US$12.61/lb, ($27,805/tonne) a price we believe is unsustainable and will lead to demand destruction," Stock Resources said in a client report.


"While the price increase is driven by the market's perception of a higher-than-forecast nickel deficit for 2006 and the entry of speculators, the price is likely to fall as a reality check emerges over what prices the industry can really bear," it said.

"This is likely to drag down all nickel stocks irrespective of individual company merits," it said.

Driven by speculative buying first by hedge funds and now pension funds, which use commodities such as metals to diversify their portfolios, prices of nickel, copper and other metals have reached record highs this year.

But industrial buyers were now looking for ways to cut down their use of these expensive metals, analysts have said.

"We are ... well into the area where the use of metals as a financial instrument is doing real damage to the industries who use and produce these metals," David Humphreys, chief economist at Russian mining giant Norilsk, told a Reuters forum on the industry.


However, others say demand for nickel is likely to remain strong, with consumption in fast-industrialising China, already lapping up much of the world's nickel, seen growing by 19 percent a year for at least the rest of the decade.

Nickel inventories held by the London Metal Exchange have dwindled to 8,244 tonnes, representing less than three days of global consumption.

Several big mining projects, including Inco Ltd. (N.TO: Quote, Profile, Research) of Canada's Goro mine and Falconbridge Ltd.'s (FAL.TO: Quote, Profile, Research) Koniambo mine, both in nickel-rich New Caledonia, are still under development.

Consumption of nickel should rise 4 percent to 1.39 million tonnes this year, according to the Australian Bureau of Agricultural and Resource Economics.


Australia mines about 200,000 tonnes of nickel annually, mostly from outback lodes. Diversified miner BHP Billiton Ltd./Plc. (BHP.AX: Quote, Profile, Research)(BLT.L: Quote, Profile, Research) is the country's biggest supplier and is spending about $1.8 billion digging a new mine in far western Australia yielding 50,000 tonnes a year.

Ahead of a retreating nickel price, Stock Research said it would "cash in its remaining chips" in Australian nickel miner Mincor Resources N.L. (MCR.AX: Quote, Profile, Research), whose stock is up 84 percent this year to A$1.18 in tandem with nickel prices.

Fellow mid-sized miner Jubilee Mining Ltd. (JBM.AX: Quote, Profile, Research) is up 20 percent this year to A$9.00, while Sally Malay Mining Ltd.'s (SMY.AX: Quote, Profile, Research) shares have almost doubled to A$1.37. ($1=A$1.33)

 

[michael_selway]

Nickel its crazy atm, but yeah unsustainble one would think.

Sometime in the next 6 months or so, i think it might happen for Zinc as well.

Macquarie ups nickel, copper, iron ore price forecasts
Source: Dow Jones

See also
Nickel Board
Nickel CatalogMacquarie Research Wednesday issued upgrades to its price forecasts for copper, nickel and iron ore, as well as lifting profit expectations for major miners including BHP Billiton (BHP) and Rio Tinto plc. (RTP).

Macquarie lifted its forecast for average nickel prices this year by 14.7% to US$8.45 a pound after the stainless steel ingredient's recent surge to all-time high levels on shrinking global stocks.

Macquarie also increased its copper price forecast for 2006 by 16.7% to US$2.96 a pound.

While the upgraded forecasts for base metal prices are still below current London Metal Exchange levels, Macquarie's upgraded iron ore prices for 2007 represent an increase on 2006 levels.

The investment bank now forecasts iron ore fine prices at 82.63 cents a ton for 2007, up 12.5% on its previous call and from this year's 73.45 cents, with lump prices set to rise to US$1.05 next year from this year's 93.7 cents.

However, Macquarie still expects prices of most commodities to ease back over the next three years from current high levels as markets come back into balance.

"We remain positive on the near-term outlook for commodity markets, although we view 2006 and 2007 (in some cases) as the peak of the current commodity price cycle and see supply growth gradually catching up and overtaking demand growth," it said.

The less bearish commodity view translates to earnings upgrades for several major mining companies.

Against a backdrop of tight global nickel and copper markets, Macquarie lifted its profit expectation for Inco Ltd (N.TO) by 36% this year, 49% next year and 100% in 2008.

Similarly the bank lifted its earnings expectations for Phelps Dodge Corp (PD) by 28%, 15%, 3% over the next three years respectively. It upwardly revised BHP Billiton's three-year profit forecasts by 2%, 5% and 6% and Rio Tinto's by 8%, 7% and 7%.

The positive earnings momentum for miners is expected to remain supportive of share price performance in the near-term, Macquarie said.

"Those companies with exposure to our preferred base metals of nickel and copper continue to benefit most while the fundamentals for the bulk commodity markets of iron ore and thermal coal continue to exceed earlier expectations.

It retained a preference for large diversified miners such as BHP Billiton, Rio Tinto, Companhia Vale do Rio Doce (RIO), Xstrata plc (XTA.LN) and Teck Cominco Ltd (TCKb.TO) given their ability to absorb ongoing cost pressures and delays expected at both the operating and development level.

However, it also underlined the attractiveness of selected leveraged plays such as Norilsk, Inco and Jubilee Mines NL (JBM.AU) in nickel; Phelps Dodge in copper and Kagara Zinc Ltd (KZL.AU) in copper and zinc; Lihir Gold Ltd (LHG) and Oceana Gold Ltd (OGD.AU) for gold exposure; and Iluka Resources Ltd (ILU.AU) in the mineral sands.

thx

MS

 

[porkpie324]

so, there we have it all, the last 2 posts, one expert says nickel is to crash another expert is supporting a rise. I have just checked the depth of market for mcr there is great support around the $1.10 area over half million shares on the buy side. But as i said a few days ago we're in bluesky territory now for many nickel miners, so it gets back to fundermentals, the forecasts for many miners is on lower nickel prices anyway, so i'm looking to buy in again on weakness. porkpie

 

[michael_selway]

so, there we have it all, the last 2 posts, one expert says nickel is to crash another expert is supporting a rise. I have just checked the depth of market for mcr there is great support around the $1.10 area over half million shares on the buy side. But as i said a few days ago we're in bluesky territory now for many nickel miners, so it gets back to fundermentals, the forecasts for many miners is on lower nickel prices anyway, so i'm looking to buy in again on weakness. porkpie

Its up to 13 a pound now!

Nickel ¬ Jul 14, 08:31
Bid/Ask 13.0635 - 13.1542
Change +0.8921 +7.33%
Low/High 12.0807 - 13.1542
Charts

Someones trying to buy the remaining 3000 up, but who is?

thx

MS

 

[rederob]

MS
More recent inventory data is tabled below.
Within the fortnight nickel stocks may run out, given the present rate of drawdown and cancellation.
The key to this trend is sustained cancellations.
In May 2005 when inventory was equally as critical, resupply was robust and cancellations had dried up: Neither of these latter factors are currently at play.
Despite these high nickel prices, it does appear Oz equity markets are already factoring in a sharp retrace.

 

[michael_selway]

MS
More recent inventory data is tabled below.
Within the fortnight nickel stocks may run out, given the present rate of drawdown and cancellation.
The key to this trend is sustained cancellations.
In May 2005 when inventory was equally as critical, resupply was robust and cancellations had dried up: Neither of these latter factors are currently at play.
Despite these high nickel prices, it does appear Oz equity markets are already factoring in a sharp retrace.

Thanks for thr data

i dont know but i think more so who is buying the inventory and why at such high prices and such rapidnes? speculators? but who?

thx

MS

 

[Kipp]

Thanks for thr data

i dont know but i think more so who is buying the inventory and why at such high prices and such rapidnes? speculators? but who?

thx

MS

If you were a fund manager or bank who had a massive stake in a Nickel producer... don't you think you would try and add to the shortage by buying 1000 tonnes of so of what is already a pissy stockpile?
27mill outlay would be peanuts if you were holding a $300 mill of SMY, MCR Phelps dodge shares etc (granted that is dificult when MCR has a market cap of ~220mil)...

Then you start selling them offwhen the shares were at all time highs, and then sell off your Ni stockpiles and short th market...
No idea if any of this is possible... but if I had 500 mill I'd think about it...

 

[rederob]

Thanks for thr data
i dont know but i think more so who is buying the inventory and why at such high prices and such rapidnes? speculators? but who?
thx
MS

MS
Speculators should now be sidelined from nickel, or will suffer heavy losses.
At this point one would have to conclude the buyers are mostly consumers of nickel - they need the nickel to keep their (stainless) steel production facilities running.
This deduction is based on the wide geographic spread of drawdowns and ongoing cancellations.
Moreover,the data consistency tells us that the pace is not slow.
Expect a ridiculously high price spike soon as short sellers feel the pinch of being caught naked and will pay any price to avoid the ignominy.

 

[rederob]

If you were a fund manager or bank who had a massive stake in a Nickel producer... don't you think you would try and add to the shortage by buying 1000 tonnes of so of what is already a pissy stockpile?
27mill outlay would be peanuts if you were holding a $300 mill of SMY, MCR Phelps dodge shares etc (granted that is dificult when MCR has a market cap of ~220mil)...

Then you start selling them offwhen the shares were at all time highs, and then sell off your Ni stockpiles and short th market...
No idea if any of this is possible... but if I had 500 mill I'd think about it...

Sorry Kipp, I was elsewhere and missed your intervening post.
Imagine this.
You are vastly wealthy and do as you say above, ie "short the market".
The risk is not having metal to sell if the contract buyer calls for delivery.
Lo and behold, it's now August and there is no LME metal available, at all, anywhere.
Your buyer wants to take delivery.
Over to you Kipp, for an answer..........
What are you willing to pay, and to whom?
What will default cost you?

 

[michael_selway]

MS
Speculators should now be sidelined from nickel, or will suffer heavy losses.
At this point one would have to conclude the buyers are mostly consumers of nickel - they need the nickel to keep their (stainless) steel production facilities running.
This deduction is based on the wide geographic spread of drawdowns and ongoing cancellations.
Moreover,the data consistency tells us that the pace is not slow.
Expect a ridiculously high price spike soon as short sellers feel the pinch of being caught naked and will pay any price to avoid the ignominy.

hm main thing is underlyign demand and supply, and future U-D & S

http://www.basemetals.com/stocks.aspx

ive noticed theres a consistent 'Ins" added to On warrants as well, so thsi means its not tight at all? so some non consumer is just trying to buy up from LME?

Another thing if DOW continues to go down like on Friday but basemetals goes up, do you thing aussie resource stocks will go up or down?

thx

MS

 

[Kipp]

Sorry Kipp, I was elsewhere and missed your intervening post.
Imagine this.
You are vastly wealthy and do as you say above, ie "short the market".
The risk is not having metal to sell if the contract buyer calls for delivery.
Lo and behold, it's now August and there is no LME metal available, at all, anywhere.
Your buyer wants to take delivery.
Over to you Kipp, for an answer..........
What are you willing to pay, and to whom?
What will default cost you?

Me and my investment conglomerate just sank $27mill into 1000t Nickel (see LME) now look at Ni rocket up another 60c/lb...

Rob I don't doubt your knowlegde over mine, you called the shots on Ni LME prices very well over the past few months... all I'm suggesting is that the entire Nickel stockpiles could be bought out for a pretty small pile of money (in investment banking terms) so it would be easy to corner the market via speculation...

 

[michael_selway]

Me and my investment conglomerate just sank $27mill into 1000t Nickel (see LME) now look at Ni rocket up another 60c/lb...

Rob I don't doubt your knowlegde over mine, you called the shots on Ni LME prices very well over the past few months... all I'm suggesting is that the entire Nickel stockpiles could be bought out for a pretty small pile of money (in investment banking terms) so it would be easy to corner the market via speculation...

You have to be careful of the "in", additions to On Warrants

Look how much is coming in now, 700k tonnes! this week alot came in

Underlying Demand/Supply may be in surplus thats why

thx

MS

 

[rederob]

You have to be careful of the "in", additions to On Warrants

MS
Did you not subscribe to the link?
You have posted data a day old.
810 tonnes cancelled overnight leaving the ratio of cancelled to total nickel at LME at an astonishing 60%.
Expect more fireworks in coming days as drawdowns will be hefty and it is not likely that restocking levels have a chance of meeting demand.
$30k here we come!

 

[michael_selway]

MS
Did you not subscribe to the link?
You have posted data a day old.
810 tonnes cancelled overnight leaving the ratio of cancelled to total nickel at LME at an astonishing 60%.
Expect more fireworks in coming days as drawdowns will be hefty and it is not likely that restocking levels have a chance of meeting demand.
$30k here we come!

Relying fully on Cancelled figures is not 100% accurate of the underlying demand/supply as there could be "fake" buying

Thats why you also need to look at "Ins" Addition to On Warrants as well

Yeah have subscribed but they only send u the info once a day?

thx

MS

 

[michael_selway]

MS
Did you not subscribe to the link?
You have posted data a day old.
810 tonnes cancelled overnight leaving the ratio of cancelled to total nickel at LME at an astonishing 60%.
Expect more fireworks in coming days as drawdowns will be hefty and it is not likely that restocking levels have a chance of meeting demand.
$30k here we come!

Hi thx, MI daily newsletter is very nice indeed, but they have a week off this week?

Btw alot of "ins" for nickel, copper, and aluminium, is this a bearish sign u think? or just once off?

thx

MS

 

[rederob]

Btw alot of "ins" for nickel, copper, and aluminium, is this a bearish sign u think? or just once off?
thx
MS

MS
We should expect this to continue for a few more weeks, then get a rebound in demand as the northern summer slumber comes to an end.
Look for some bargains in coming weeks.

 

[Makavel]

Ni
Cu
PGE

but nickel for sure the consumption by china etc. will continue to be huge for many years espically with the olympics etc. and general populations growth and demand.

Michael

 

[rederob]

Ni
Cu
PGE
but nickel for sure the consumption by china etc. will continue to be huge for many years espically with the olympics etc. and general populations growth and demand.
Michael

Michael
The "supercycle theory" has not been put to bed yet.
That is, almost 3 years into the commodity bull cyle we remain a whisker off all time highs for many off the base metals.
The ongoing transfer of wealth from West to East dictates that the former have nots will be into consumerism at an increasing rate, including car ownership.
I don't know if "keeping up with the Wong family" in China or the Kim family in Korea is in vogue in Asia. But if it is, expect commodity prices to stay high well into the future.
Remember that Japan's post WWII industrialisation involved only 100 million people in a very small nation. China is a ten times bigger proposition in a country much larger than Australia!
Then toss India into the equation.
We are witnessing a slow changing of the "economic guard".
Within 10 years my view is that the US will be economically subservient to China at almost every level of economic production. Individually Chinese people are not likely to be as wealthy as Americans, but then again they will not be carrying the incredible personal debt of Americans, either.
For this reason, I have a strong leaning to MRE as a nickel play in our local market - 40 years of nickel reserves and continuous improvements to their production capacity (which has been relatively poor in recent years).

 

[Makavel]

fair enough i didnt know this was based on MRE. But sure china will become the super power due to alot of large corporate organisations moving facilities etc. offshore.

but the demand will still grow with economies of scale and their demand for commodities as a whole.