Nickel industry sees a ray of hope

Nickel industry sees a ray of hope

Nick Evans - The West Australian on July 6, 2016, 1:50 am

WA nickel producers finally have some cause for optimism after a dismal first half of the year, as the price of the steelmaking commodity hit eight-month highs this week.

Nickel crossed the $US10,000 a tonne mark on the London Metal Exchange on Monday night for the first time since November 2015, closing at $US10,300/t. It has been on a strong run since last week on the threat of mine closures in the Philippines, the world’s biggest exporter of nickel ore.



Threats by Philippines President Rodrigo Duterte and the country’s environment minister to shut mines that don’t meet environmental standards have raised the prospect of more closures, helping lift the price.



Exports of laterite ore have fallen 27 per cent this year to the end of May on a year-on-year basis, according to Morgan Stanley research. Nickel hit a 13-year low of about $US7600 in February.



That forced about 74,000 tonnes of supply out of the market this year, according to a Morgan Stanley research note this week. WA’s Panoramic Resources and Mincor Resources were among those to close mines.



Nickel stockpiles are also falling, adding to hope in the industry the worst may be over. Nickel in LME warehouses fell to 378,114t on Monday, according to Bloomberg data, down from long-term highs of more than 470,000t in June last year.



The rising nickel price has also lifted shares of Australian-listed producers, with Western Areas up more than 22 per cent over the last week, to a $2.47 close last night. Independence Group, which mined the first development ore from its under-construction Nova mine last week and produces nickel from its Long mine at Kambalda, is up 56¢, or 18.7 per cent, to $3.57.



The rising price will help alleviate the threat of further mine closures at under-pressure WA producers, including Glencore’s Murrin Murrin and First Quantum Minerals’ Ravensthorpe mines. But a more sustained rise may be needed before Panoramic and Mincor consider returning operations to production.



Panoramic boss Peter Harold toldWestBusiness last week the company would complete feasibility studies on extensions to its Savannah and Lanfranchi mines ahead of any decision to restart.