Is Nickel Returning to Investors’ Radar?

 

Is Nickel Returning to Investors’ Radar?

February 29, 2024 – Is nickel, once again, attracting investor attention, or is Chinese speculation driving its resurgence? Currently, numerous reports and analyses are vying to sway its price.

Nickel's Current Standing

Recent upticks in reports from the nickel mining sector, rumors of potential US sanctions, challenges in New Caledonia, and conflicting information on price trends and availability suggest that nickel is either back in speculative focus or experiencing familiar fluctuations driven by a key stakeholder.

[caption id="attachment_4279" align="aligncenter" width="700"]Nickel-Price-and-Trend-February-2024-Stainless-Espresso Nickel-Price-and-Trend-February-2024-Stainless-Espresso[/caption]

Current Situation

The price of nickel has been steadily climbing since 2019, experiencing spikes, notably triggered by speculative activity in spring 2022, reaching over $100,000/MT at times.

In mid-February 2024, Indonesia, the world's largest nickel producer, saw the election of a new president, with final results anticipated in March. However, the former defense minister, Prabowo Subianto, seems to be the presumptive winner.

Although Indonesia granted new mining licenses, the allotments fell short of expectations. Moreover, many Indonesian nickel smelters appear to be operating with minimal ore stocks. In February, prices surged by over 14% compared to the previous month.

Chinese NPI prices have seen an 8-10% increase since December 2023, while Indonesia also experienced a 3% rise month-on-month.

Media reports are projecting a sustained low price due to Indonesian supply, despite conflicting indications. However, even with this volatility, the current price stands 45% higher than February 2020's record low, indicating a continued upward trend.

Mining companies worldwide are voicing concerns over prices being insufficient for profitable operations. Australian miners are urging government assistance, especially in nickel mining, to avoid potential closures. Meanwhile, New Caledonia, reliant on substantial aid for nickel mining, is advocating for a declaration of economic and social emergency.

Stainless steel prices in China surged approximately 7% from mid-December to February's end. Taiwan is expected to raise stainless steel prices in response to the nickel upswing in March 2024. Additionally, EU stainless steel producers have hiked alloy surcharges for March by over 3.5% in some cases.

Our Current Perspective on Nickel

Based on existing data, we anticipate nickel prices to maintain their volatile ascent. Failure to do so could jeopardize critical mining ventures, particularly in the West. Prospective interest rate cuts by the US Federal Reserve in 2024 might further drive commodity prices, given the potential rebound of the US economy from its current downturn.

Even the Indonesian government lacks clarity on the true availability of nickel ore. Delays in issuing new mining licenses may indicate administrative hurdles or, more worryingly, a depletion of ore sources.

Speculation regarding potential Chinese involvement remains just that – speculation – and will likely only become evident in hindsight.

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