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Nickel - the metal for 2007?

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BREND said:
Not only that, currently 1 US hedge fund holds more than 90% of nickel inventory at LME warehouse now.
Click to expand...

so the nickel market is being "played" atm?

thx

MS
 
BREND said:
How I know? I'm a metal futures dealer, I have access to a bit more information than retail investors.
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Brend, thanks for the information. I must have missed this particular article on Bloomberg.

Just so that I can understand it, the Nickel stockpile on LME is only around 5000 t (25/1/07), are you/they saying that 90% of this is held by one company or they hold a lot more than what's officially listed? If that's all they hold, 5000T isn't vey much at all. How much of an impact will it have if they were to sell off, seeing that demand currently way outweighs supply. Sorry, if the question sounds really dumb.
 

No worries, no question is too dumb.

The information that 90% of the inventory is held by one US Hedge Fund is not mentioned in any article in Bloomberg.

90% means 90% of the nickel inventory level at LME warehouse, yes not much for nickel. The fund freezes the supply level, while the demand continues to grow, hence will create upward pressure for nickel price.

Are you trading metal futures? We provide all these funds' information to our clients everyday, ie whether funds are controlling the inventory level, whether banks are pushing up particular metals lately, whether funds are buying call options for particular metals?

In today world, hedge funds play a very important role in commodity trading. If you open account with us, we can provide all these information to you as well...

Sometimes I provide funds' information in my blog:
http://basemetal-trading.blogspot.com/

For investors who just want to make their investment decision based on fundamentals, I always ask them to play lead and tin instead, where the involvement of funds are minimal.

Currently I notice a strange situation in the metal market now, all the industrial metals inventory are controlled by funds now. I have a feeling that funds are all prepared to push up metal prices up once copper price is up.

Futures product is a leveraged product. Leverage is a double edge sword, it can work for you, and also work against you.
 

Hi do the funds hold alot of zinc?

thx

MS

http://www.bloomberg.com/apps/news?pid=20601012&sid=anJA46fY7oMU&refer=commodities

 
hi Brend, thanks for the information and no I'm not a metal futures trader and I know stuff all about metals. I'll check your blogs regularly for any good tips or insights.

May I ask where do you see nickel over the next 12 months? Is it likely to stay as high as it is today? Most of the graphs I've seen point to a steady rise. I'm just curious to know how much of an impact hedge funds will have on the price.
 
BREND said:
Yes, one fund holds more than 50% of zinc inventory at LME warehouse.
For zinc, my view is that it has bottomed, but the rebound will not be strong, unless copper rally or strong fall in zinc inventory.
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do you think copper will remound strong?

also how much do funds hold lme copper atm? (althoug it keeps rising the inventory)?

thx

MS
 

Thanks for reading my blog. I predict that nickel price will rise a bit more, and close lower at the end of 2007. Demand for nickel has slowed down in China, this is a sign that upside is getting limited. And new supply of nickel is coming up towards the end of 2007.

Hedge funds of course have a big impact on nickel and other metals in today's world. Copper price rises from $3000 to $7000, heard that it is partly due to the act of a UK hedge fund.
 
michael_selway said:
do you think copper will remound strong?

also how much do funds hold lme copper atm? (althoug it keeps rising the inventory)?

thx

MS
Click to expand...

When you are looking at copper, you have to take note that copper is traded at 3 exchanges, Shanghai, Comex and London Metal Exchange (LME). So even if funds hold huge position in LME, the impact may not be great.

Will copper rebound strong? It really depends on how much State Bureau Reserves of China is buying up copper. As far as I can see from the data at Korea warehouse, I predict that buying has been slow and in small quantity. However I do believe that copper price is bottoming soon. A strong support level at $5500.

Buy some resources stocks now to take advantage of the copper rebound.
 
kgee said:
Hey Brend any copper favs?
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My copper fav is Southern Copper Corporation (which is also my top picks for US market, shown in my blog below) who owns the 2nd biggest copper mine. But share price has risen quite fast since the start of this year.

http://basemetal-trading.blogspot.com/2007/01/review-on-my-3-top-picks-listed-in-us_20.html

Alternatively I would suggest buying into BHP Billiton. When copper rebounds, rest of base metals will follow up as well. Even if copper price does not rebound, I still think BHP Billiton is at least 30% undervalued now. I do think that the coming earnings announcement will surprise the market.
 

for BHP, but will next years earnings be larger or lower than this ones, you reckon, likely?

thx

MS

Earnings and Dividends Forecast (cents per share)
2006 2007 2008 2009
EPS 225.4 286.2 293.9 263.0
DPS 48.4 52.9 54.5 58.0

EPS(c) PE Growth
Year Ending 30-06-07 286.2 9.1 27.0%
Year Ending 30-06-08 293.9 8.9 2.7%


thx

MS
 

Nickel price and iron ore prices are still rising for the past 6 months.
I predict earnings will be larger than those numbers. :
Even if earnings are bad, what is the risk of buying BHP when PE is so low now?
 
This article I found while looking at Norilsk (inquisitive about their 20% holding in Lionores Black Swan W.A.) suggests that higher production costs will narrow profit margins.Though the bottom line where the company (Norilsk) plans to outlay a billion/year and other articles say the demand is insatiable.The `in between` player (hedge fund man) always likes his cut. Hope this helps with longer term optimism.


19.09.2006
Meeting future nickel demand increasingly expensive: Norilsk, Author: Robert Shridan, Edition: Platts Commodity News

The sustained period of higher nickel prices may be the sign that the global nickel industry is entering a new phase, commented Norilsk Nickel chief economist David Humphreys Tuesday at the CRU Ninth World Stainless Steel Conference in Dusseldorf, Germany.

Humphreys suggested that in the future, producers may see a steeper demand growth trend than in the previous 10-20 years, adding that the Asian region would increasingly play a dominant role, possibly displacing nickel use elsewhere in the world. He suggested that China?s presence in the global nickel market may mean the country could become a competitor for nickel producers, in the light of recent moves by Chinese companies to directly invest in various mining projects around the world.

He also said that meeting demand could be more expensive than in the past, due to higher energy prices and the fact that in the future, more production will have to come from nickel laterite deposits, which are more capital-intensive to exploit than sulfide deposits.

Recent high nickel prices have triggered a supply response, said Humphreys, but he referred to figures from CRU Research that indicated production shortfalls: 70,000 mt in 2005 and 40,000 mt so far in 2006. But "resources are substantial," he said, agreeing there was no shortage of nickel.

Humphreys said that the current wave of consolidation in the nickel industry may result in producers better able to meet the costs of exploiting new resources in the future. He added that Norilsk Nickel had committed to spending $1 billion/year from 2007-2010 to avoid a decrease in production from ore grades of declining quality and availability.

Norilsk Nickel is forecast to produce around 250,000 mt of nickel in 2006. --Rob Sheridan, robert_sheridan@platts.com
 
BREND said:
Nickel price and iron ore prices are still rising for the past 6 months.
I predict earnings will be larger than those numbers. :
Even if earnings are bad, what is the risk of buying BHP when PE is so low now?
Click to expand...

BHP's PE isnt really that "low" atm, its about 10 which is quite high considering limited growth and also its peers, like ZFX, MRE etc?

thx

MS
 
Limited growth? BHP Currently have 12 new projects/expansions set for completion within the next 2-2.5 years, including Ravensthorpe which will be a top 5 nickel mine globally. Based on consensus data from iress its trading about 8.5x earnings, and traditionally trades at 15x.
 
This is the problem though. By the time BHP's projects come into play, the supply side of the resources they will be producing more of, will already be in surplus. And Ravensthorpe has been a joke thus far, why is it likely to not be in the future?
 
Sure, by the time Ravensthorpe comes on-line it may not be capturing nickel at $18/lb, but I’m pretty confident prices will still be NPV positive in a big way. Even though it’s a laterite project last I heard costs were looking at being about $4-5/lb. That’s a pretty fat profit margin even at prices half of what they are now. And while strike action continues in New Caledonia, Goro, the other big mine projected to come on line in 08 looks like it will lag Ravensthorpe. So I would expect the nickel market to still be tight even by the time Ravensthorpe comes on line next year. Keep in mind that global nickel demand increased 5% YoY in 2006, and Chinese nickel demand increased 15% YoY. Couple this with the fact that sulphide nickel resources are becoming pretty scarce, so most new projects coming on-line will have to be laterite projects like Ravensthorpe that are very difficult technically to set up (hence cost blow outs etc), and I think supply could have a tough time catching up with demand here.
 
chops_a_must said:
This is the problem though. By the time BHP's projects come into play, the supply side of the resources they will be producing more of, will already be in surplus. And Ravensthorpe has been a joke thus far, why is it likely to not be in the future?
Click to expand...


Sure BHP has had costblowouts and skilled labour shortages at Ravensthorpe and thats been in the pipeline for years. Imagine the wealth of problems the minnows will have in the next few years getting all their 'wollopers' off the ground.

Wheres all the skilled labour going to be sourced from, where's all the plebs who are going to operate the plant coming from and where are they all going to live .

What makes you think Nickle is expensive at the present, its past prices , Im sure last years prices looked cheap and today's unrealistic!.

Personally it all seems a bit of a quagmire to me, thats only getting muddier.
 
And just a short addition.

Look at the locations of the Companies that got of the ground running during this boom.

MCR at Woodgie on the Norseman- Esperance road, IGO on the Norseman-Hyden road, Rail infrastructure (close spurs too mines) in place from the past Jap boom and maintained since for wheat export by the cockies>off loading facilties at Esperance. Process facilities at Kambalda....yada yada. The same applies for Ravo's location and the others around the Kambalda dome.
Although a bit off the beaten track, MRE and SMY have similar benifits.

Its not that their isn't Nickle in other locations, its just more cost effective and quicker to ramp in these areas. Now if exploration targets of the midtiers don't come up trumps to nearby infrastructure, the short term Nickle situation will only become worse.

Personaly I think Ravensthorpe is a goer for BHP and the cost blowouts and delays although a bummer, were unavoidable in the current resource climate
 
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