Nickel market outlook - Down but not out

This article is an extract of the monthly Commodity Briefing Service for Nickel which examines global nickel market trends over the past month.

By Louise Gammon and Sanjay Saraf | 13 April 2017

After a sharp selloff in March, nickel prices have leveled out, finding some support at about US$10,000/tonne. Nevertheless, the road ahead is likely to remain paved with volatility, as policy maneuvering in the Philippines rumbles on.

London Metal Exchange three-month nickel prices started the second quarter at US$9,850/tonne after a weaker-than-anticipated first quarter. As a result, we have revised down our price forecast for the rest of the year. We still expect the global nickel market to gradually move into a deeper deficit, although better nickel ore and nickel pig iron supply from Indonesia could prevent this deficit from reaching previously anticipated levels. We forecast prices to average US$10,700/tonne in the second quarter, bringing our annual average forecast to US$10,781/tonne for 2017. However, the market does seem to have lost some of its bullish sentiment, as prices have more recently traded as low as US$9,700/tonne. We continue to monitor market developments and to assess the prospect for any further downward price forecast revisions.

The outcome of environmental policy deliberations in the Philippines remains the largest unknown market-moving factor at this point. Without explanation, in late March the Philippines' Department of Environment and Natural Resources, or DENR, adjusted the number of mines ordered closed and suspended to 22 from 23. Global Ferronickel Holdings' platinum group metals division and Techlron Mineral Resources were taken off the list of companies whose operations had to close. Strong Built Mining Development was moved from the suspended list to being recommended for closure. The final ruling on the fate of all 22 mines has the potential to move global prices significantly, as the Philippines remains China's largest supplier of nickel ore. However, we could be waiting some time for the verdict.

Adding to the uncertainty, it came to light in early March that the DENR has allowed mining companies that have had their operations suspended to export ore from stockpiles. This move was made by the DENR to protect the environment from a potentially hazardous build-up of silt in local bodies of water, rather than as a relaxation of its suspension ruling.

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Nickel market outlook - Down but not out

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