The ongoing global supply shortage saw the nickel price rise $105 to $10,740 overnight, its highest level since September 1990. Analysts seem unanimous in the view that the price will target $11,000 soon with no reason why it shouldn't carry on through there. Many believe it could reach $20,000/tonne over the next 18 - 24 months.
Years of cut-backs in production when nickel prices were low have created a significant shortfall, which China's accelerating industrialization has exacerbated. Despite recent increases in production, stockpiles fell 18 tonnes to 32,368 tonnes, indicative that production cannot keep pace with burgeoning demand.
The above scenario suggests that recent rises in the share price of many Australian nickel stocks were inevitable and that those with substance behind them may enjoy further rises for some time yet. The trick - in my opinion - is to discern which stocks have low cost production and ore bodies of sufficient size to ensure sustainable income streams when prices eventually return from the stratosphere in 2 - 3 years time.
As I have stated often before, I prefer Titan (which I hold) and IGO (which I wish I held). I have concerns about some of the other stellar performers in share price terms despite the terrific ore bodies they have discovered and their enormous potential because of the likelihood of further capital raising and their lead-times to production. I like Titan because it is cashed up and very close to production as well as being an active and very successful driller.
All in all, though, it would seem that the future of nickel explorers and producers is bright.
An eventual puncturing of the speculative bubble surrounding some stocks is inevitable down the track IMO but the exciting prospect remains that many of these companies have every chance of delivering on their extraordinary promise.
