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Have we reached the other side of the sustained low nickel price curve? Just three years ago nickel was about US$9.50 a lb which is around US$21,000 a ton, which at today’s exchange rate of US$0.8 would be A$26,000. It then entered into a steady decline bottoming out at about US$3.50 in February 2016. It has since been on a roller coaster ride reaching just over US$5.00 a lb in June 2016, back down to $US4.00 in June 2017 and now back up to US$4.60! The encouraging sign is that of an upward trend for the last two months, albeit a bit erratic!
The industry needs a nickel price in excess of US$5.00 a lb to get the metal back onto the radar. In the case of the laterite operations at Ravensthorpe, they report that they need US$5.70 a lb just to break even so there is still some way to go. The metal will need to show a sustained upward trend and not fall backwards in order to generate a degree of confidence before capital is likely to be committed to reopening moth balled mines, and each one will have its own trigger point.
So what is likely to be the driver for a steady increase in the price of the metal? I am reliably advised that there are a number of factors at play not the least of which is speculators who can cause significant gyrations in the market distorting an already difficult picture to read, but there are a couple of factors that appear to be working towards a more positive outcome. Nickel stockpiles on the LME peaked at 470,000 tons in June 2015. There are also stockpiles held on the Shanghai Futures Exchange and by nickel mining companies so the LME is not a complete picture but regarded as a reasonable guide. The LME stockpile is now at 375,000 tons and shows an overall long term downward trend. Consumption of nickel is also set to rise. The Chinese steel market is still growing and that is the largest single consumer of nickel by some way but there are two other growth areas, electroplating and for the Lithium Ion battery market where it is used as the battery cathode.
Nickel West, which recently reported good results in its June quarter, is moving ahead with the development of a nickel sulphate plant which is the preferred form of nickel for both electro plating and battery technology. With the strong growth in battery manufacturing, although still a small consumer of nickel compared to the steel and stainless steel industries, it is still a growth market which all helps to support a recovering nickel price so it is not all doom and gloom! Maybe 2017/18 will be our nickel turnaround year!