nickel price forecast

Norilsk Nickel believes the worst is over, as do ANZ and a number of other investment banks.

The head of strategic marketing at Norilsk, Anton Berlin, told the Bloomberg news service on October 9 that the rise in the LME stockpile masked a balanced market.

“What is happening now is that the stockpiles are just flowing from non-transparent to transparent warehouses,” Berlin said.

ANZ shares that view. Its senior commodity strategist, Daniel Hynes, said in a research note last week that recent Chinese “exports” of nickel were “merely the movement of previously hidden inventories”.

In China, the world’s biggest consumer of nickel, a rush is on to find a replacement of the raw material lost through the Indonesian ban on unprocessed exports. That has led to a rise in shipments from the Philippines, but that is lower grade ore and there is less of it.

With multiple factors at work, including the biggest issue of all, whether Indonesia will retain its ore-export embargo, the nickel market is entering unchartered waters with supply and demand being buffeted by competing forces and distorted by the Qingdao fraud.

ANZ, however, is clear in its interpretation of the situation.

“The fundamentals remain unchanged,” Hynes wrote. “The market remains on track to move into a sizeable deficit as the Chinese NPI industry adjusts to life without Indonesian nickel imports.

“In the short term, rising LME inventories will remain a headwind, as with the rising U.S. dollar. But with Philippines exports expected to ease in the coming months, we feel prices should start to ease higher over the last couple of months of the year.

“Real upward momentum in prices is still not expected until early 2015.”

If that assessment by the ANZ’s senior commodity strategist is correct than his nickel-price forecast might also be correct, and that’s for a tighter market pushing the price “beyond $US25,000 a tonne” – or more than $US11/lb which would be 50% more than the latest nickel price of $US7.37/lb.

Key take-out: If ANZ’s forecasts are correct, the nickel price could lift more than 50% to over $US11 a pound over the next 12 months.