Nickel - the metal for 2007?

[rederob]

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.

Michael
Minara (MRE) is just one of the nickel stock I like - nothing more or less.
It has world clas nickel reserves, but a nickel plant that also has world class problems to resolve to reach nameplate capacity.
My point was that having 40 years of reserves gave it the capacity to rise steadily in price if the supercycle theory is proven true.

 

[Sean K]

2305 GMT [Dow Jones] Nickel pure-plays Minara (MRE.AU), Mincor (MCR.AU), Jubilee (JBM.AU), Sally Malay (SMY.AU), Western Areas (WSA.AU) likely to outperform broader mining eqities market as metal touches record high Friday, while copper, other metals lose ground. Weekend reports South Korean steelmaker Posco scrambling to cover 10,000-ton LME short, compounded by 20,000-ton physical short may send prices on run back into uncharted territory. Posco news adds to reports CVRD (RIO) entered Inco (N) takeover fray, while strike continues in Voisey's Bay mine Canada. (JAD)

 

[michael_selway]

Michael
Minara (MRE) is just one of the nickel stock I like - nothing more or less.
It has world clas nickel reserves, but a nickel plant that also has world class problems to resolve to reach nameplate capacity.
My point was that having 40 years of reserves gave it the capacity to rise steadily in price if the supercycle theory is proven true.

http://www.ft.com/cms/s/38fc6c7c-2b...age=9ff9d7a4-506d-11da-bbd7-0000779e2340.html

Mystery investor bets on nickel fall
By Chris Flood

Published: August 14 2006 21:06 | Last updated: August 14 2006 21:06

Mystery on Monday continued to surround the identity of a participant who has built up a big position on the London Metal Exchange, betting that nickel prices will fall.

The LME’s latest update showed that one participant or group holds 30 to 40 per cent of the short nickel positions on the exchange.

The position appears to have been built up since mid-July, as there was no single player or group holding 5 to 10 per cent of the LME short positions on July 17. The LME does not disclose the identity of participants who have taken long or short positions. It does not disclose the extent of the overall short positions.

Posco, the South Korean steel producer, denied a report that it is struggling to cover a 10,000 tonne short nickel position on the LME and an additional 20,000 tonne position on the physical market.

Posco said that the short position on the LME was less than 1,000 tonnes and that the company did not have any short positions on the physical market.

“Posco is not a speculator. The company’s demand for nickel is only 70,000 to 80,000 tonnes a year. Such a large short position is nonsense considering the company’s real demand for nickel,” a spokesperson told Reuters.

Analysts were also sceptical. “LME prices should have soared if Posco has to cover a large short position,” said Kim Yung-joong, analyst at Samsung Securities. “I think Posco does not have such a large short position. Also the losses from less than 1,000 tonnes of short position would not seriously hurt Posco.”

Three-month nickel prices soared to a record $27,300 a tonne last week, supported by a strike at Inco’s Voisey Bay mine in Canada and a fall in global inventories to critical levels, less than one day’s worth of world consumption. London Metal Exchange inventories rose by 126 tonnes to 5,814 tonnes on Monday. Cancelled warrants stand at 60.5 per cent of nickel stocks. Nickel for delivery in three months rose 2 per cent to $27,150 a tonne.

Posco consumed 90,000 tonnes of nickel last year and is trying to cut usage. It has also announced plans to invest $352m in two nickel projects with Société Minière du Sud Pacifique to cut raw material costs.

Posco shares closed 0.4 per cent higher at Won233,000 on Monday.

While nickel demand is set to grow healthily for the rest of the decade, strengthened by strong Chinese stainless steel output, there is a string of projects expected to come on stream.

Copyright The Financial Times Limited 2006

thx

MS

 

[rederob]

The odd fool tipped nickel to hit $30k this year, but they really were not too bright.
Until tonight.
Nickel didn't hit resistance at $30k at all: Just smashed through to sit a shade under $31k

 

[michael_selway]

The odd fool tipped nickel to hit $30k this year, but they really were not too bright.
Until tonight.
Nickel didn't hit resistance at $30k at all: Just smashed through to sit a shade under $31k

At what price do you think its a short if any (or how high do u think it can go)?

thx

MS

 

[rederob]

At what price do you think its a short if any (or how high do u think it can go)?

thx

MS

MS
With nickel we are in the land of the loonies at LME and a price spike to $50k is not out of the question.
However, the spikes are not indicative of the broader market as they are just covering short positions to the extent that is possible.
That said, LME acted overnight to protect the shorts, although the ongoing risks to position holders remain, and the financial penalties per tonne are significant as each "lot' of traded nickel is 6 tonnes:

16/08/2006
LME Imposes Backwardation Limit for Nickel

At 1700 hours today, The London Metal Exchange (LME) announced that the Special Committee has imposed a backwardation limit of $300.00 per tonne per day in the nickel market and that there will be a suspension of the Lending Guidance in respect of those with nickel positions.
After taking account of all the relevant factors, and following consultation with LCH.Clearnet, the Special Committee has resolved that:

1. Backwardation limit

Those with short positions in nickel falling prompt on Friday 18 August 2006, and on subsequent prompt dates until further notice, who are unable to effect physical delivery and/or unable to borrow metal at a backwardation of no more than $300.00 per tonne per day, shall be able to defer delivery for a day at a penalty of $300.00 per tonne. Those with long positions for prompt on those days who are subject to deferred delivery shall be entitled to compensation of $300.00 per tonne per day

 

[michael_selway]

MS
With nickel we are in the land of the loonies at LME and a price spike to $50k is not out of the question.
However, the spikes are not indicative of the broader market as they are just covering short positions to the extent that is possible.
That said, LME acted overnight to protect the shorts, although the ongoing risks to position holders remain, and the financial penalties per tonne are significant as each "lot' of traded nickel is 6 tonnes:

Yeah On Warrant only like 1300k

http://www.bloomberg.com/apps/news?pid=20601082&sid=ajHE8Xmxh8go&refer=canada

LME intervenes in nickel market
By Chris Flood in London

Published: August 16 2006 21:40 | Last updated: August 16 2006 21:40

The London Metal Exchange, the world’s biggest base metals exchange, was forced to make an extraordinary intervention in the nickel market on Wednesday to head off the risk of defaults on trades by speculators as the metal soared to a record high.

The three-month nickel price surged to its biggest one-day rise since January 2004, leaping 6.4 per cent to a record $29,200 (£15,300) a tonne amid what one analyst called “panic” covering of short positions, where traders bet on a fall in the metal’s price.

Dealers believe the metal could now breach $30,000 a tonne, because global inventories of nickel have shrunk to less than one day’s worth of world consumption. The cash price of nickel soared 14.2 per cent to $33,350 a tonne a on Wednesday.

Although London Metal Exchange nickel inventories rose 354 tonnes to 6,162 tonnes, the amount of metal actually available to the market is just 1,374 tonnes, since a large proportion of the stockpile is earmarked for delivery. That compares with annual production of about 1m tonnes.

The LME said that to preserve orderly trade, it would permit traders with “short” positions, betting on price falls, to defer settlement of their trades.

Given the tightness of supplies, the exchange also offered some leeway to traders with a short position. It said that from Friday, anyone with a short position who was unable to make physical delivery could postpone delivery at a cost of $300 a tonne per day – equivalent to about 1 per cent of current market prices.

The LME imposed a limit in the spread between nickel cash and futures prices of $300 per tonne per day. It also suspended rules that require some traders with big long positions – those betting on rising prices – to lend metal to short-sellers who need to settle trades.

Simon Heale, chief executive of the LME, said: “Nickel stocks are at historically low levels and we now have a genuine material shortage. Our first priority is to ensure that trading remains orderly and to prevent the risk of settlement defaults.”

Robin Bahr of UBS said there was “extreme tightness” in the nickel market that suggested “shorts have become trapped and are desperately trying to cover their positions”. Nickel prices have doubled this year.

On Warrant is virtually gone, but "ins" are still frequent

thx

MS

 

[scsl]

i have no shares in nickel companies but the recent run in the nickel price has definately caught my attention...

if i wanted to have a closer look at some nickel stocks, which companies do you suggest i start off with? perhaps companies that are or will be producing soon, have majority of operations in nickel so i can effectively buy into the rising price of nickel.

cheers,
scsl

 

[michael_selway]

i have no shares in nickel companies but the recent run in the nickel price has definately caught my attention...

if i wanted to have a closer look at some nickel stocks, which companies do you suggest i start off with? perhaps companies that are or will be producing soon, have majority of operations in nickel so i can effectively buy into the rising price of nickel.

cheers,
scsl

Nickel producers i knwo of

JBM, MCR, SMY. IGO, MRE, ARH

thx

MS

 

[rederob]

On Warrant is virtually gone, but "ins" are still frequent
thx
MS

MS
A function of the market is to induce restocking - your "ins" - via higher backwardation, which occurs when inventory rundowns are evident.
We are there with nickel, and I suspect other base metals will face similar issues before Xmas.
An important point to remember is that high prices are now sustainable for much longer irrespective of the "ins". Consumers will need to restock and build production reserves. However, to get to this point will require the bottom to fall out of global markets (ie meltdown), or for consumers to go offline and rest their production facilities until there is a stockbuild.
If the latter were to occur, we simply get a dominoing effect until demand is curtailed: Because order books at present are booked solid.

 

[rederob]

LME headline nickel stocks rose slightly today, but in reality it masked a 378 tonne reduction in "available" metal, bringing total open warranted stocks to a mere 870 tonnes.
Some 5k tonnes are primed to leave warehouses in the next few weeks, so the headline figure is set to fall sharply.
Expect $30k nickel prices to hold for a while, with most surprises to the upside near term.

 

[michael_selway]

LME headline nickel stocks rose slightly today, but in reality it masked a 378 tonne reduction in "available" metal, bringing total open warranted stocks to a mere 870 tonnes.
Some 5k tonnes are primed to leave warehouses in the next few weeks, so the headline figure is set to fall sharply.
Expect $30k nickel prices to hold for a while, with most surprises to the upside near term.

omg its low 870 left, one would think someone is "playing" with it on LME

"ins" are still frequent

thx

MS

 

[Freeballinginawetsuit]

SMY is an excellent nickel stock (nice resource and fundamentals), charting to just about run and I reckon it will go past $ 1.40 this time.

 

[Freeballinginawetsuit]

Nickel producers i knwo of

JBM, MCR, SMY. IGO, MRE, ARH

thx

MS

LOL at ARH, they don't have any nickel producing mine. In fact they don't have any mine except ramped ASX announcements. You can make money on there stock though, a traders dream on 3 occasions in the last 2 months.

 

[rederob]

omg its low 870 left, one would think someone is "playing" with it on LME
"ins" are still frequent
thx
MS

MS
"ins" should be going throught the roof as to deliver to spot will give you over $4,000 more per tonne than delivering on a 3 month forward contract.
Instead, a meagre inflow overnight.
LME had hoped the backwardation would draw enough metal in to quell immediate demand.
Yet "cancellations" account for over 85% of available metal.
I had wondered why more metal had not left warehouses this week, as the "out" side activity has been incredibly low by recent standards.
My suspicions is that the dominant longs are squeezing the shorts who, rather than default, are instead suffering $300/day/tonne losses in the hope they can physically get hold of some metal to deliver in order to close out their position.

Some time ago, I think in this thread, someone asked why a big player just didn't come along and buy all the available nickel. The reaon is because the metal "appears" available, but in reality may already be spoken for by more than one or two players - dominant longs who intend to take delivery within 3 months but have yet to close their positions (or cancel their warranted metal).
The risk in a tight market is that their may not be any metal to deliver, any metal at all. We may be seeeing history in the making as post-summer demand has yet to rear its head. When it does, I expect others will fall.

 

[YOUNG_TRADER]

Amazing, simply amazing,

I guess it should have been Nickel the metal for 2006
Zinc the metal for 2007

 

[michael_selway]

Amazing, simply amazing,

I guess it should have been Nickel the metal for 2006
Zinc the metal for 2007

good point!

thx

MS

 

[Sean K]

0438 GMT [Dow Jones] LME 3-month nickel sitting at new all-time high of $30,000/ton having extended 5% surge overnight on low stocks, supply-side interruption, and as speculators continue to squeeze shorts; "while the market believes there are uncovered short positions out there, it will continue to drive prices higher," says Tricom metals trading head Jonathan Barratt. Eventually, however, nickel faces "violent crash" given unsustainably steep gains, likelihood record prices will crimp demand, flush out new supply. (JAD)

Tread carefully friends.

 

[nioka]

i have no shares in nickel companies but the recent run in the nickel price has definately caught my attention...

if i wanted to have a closer look at some nickel stocks, which companies do you suggest i start off with? perhaps companies that are or will be producing soon, have majority of operations in nickel so i can effectively buy into the rising price of nickel.

cheers,
scsl

Why not look at THX who have nickel which will soon be mined by SMY and they have other interests ? They are very kind to me at this stage.

 

[rederob]

0438 GMT [Dow Jones] Eventually, however, nickel faces "violent crash" given unsustainably steep gains, likelihood record prices will crimp demand, flush out new supply. (JAD)

Tread carefully friends.

Agreed.
Except that if you look at equity prices v's nickel you will note a disparity.
Equities have already tailed off in anticipation.
I think nickel will drop below $20k quite quickly (after the bubble bursts), but probably consolidate around that level unless supply rebounds strongly.

In the interim, benchmark LME prices will guarantee that producers will reap in this quarter the highest returns received in a generation. And these profits will feed into bottom line profits.
Accordingly, I anticipate nickel producers will be re-rated by analysts and this is likely to feed into "accumulation" and higher equity prices in months to come.