Nickel price set to advance further

Nickel price set to advance further
Mine closures in the Philippines could lift prices of mining shares too.



The nickel price, which has already jumped from below $8,350 per tonne little more than four months ago to almost $10,700 currently, could climb much higher still, dragging the shares of nickel mining companies up with it, according to Swiss bank UBS.

The latest boost to the price of nickel, which is used to make stainless steel, came when the Philippines ordered the suspension of 20 more mines for alleged environmental violations. The country is the world’s biggest nickel ore supplier and if the 20 mines are closed it will bring the total shuttered to 30; most of them nickel producers.

Unless the mine owners can persuade the government to change its mind, this means the Philippines will lose 55% of its total nickel ore output, equivalent to around 11% of world supply. UBS’s analysts reckon this won’t be a problem for nickel users until early next year, given the current level of stockpiles.

Nickel price technicals positive too

However, “while physical tightness is still a few months away, financial speculators may continue to add to positions which could lift the LME spot price materially short term,” they argue, referring to the price on the London Metal Exchange.

Technically too, the nickel price is well-placed to rise, according to the technical analysts at Commerzbank, who predict it will increase on both a one-week and a one-month view. They expect the August high of $11,030 to be exceeded, with next up the November 2005 low at $11,360.

As for the companies that could benefit, the UBS analysts point to Russia’s Norilsk (MCX:GMKN) – described as the lowest cost global producer – and Australia’s Independence Group (ASX:IGO), which is developing the Nova project in Western Australia. “In terms of the equity view, we think lifting nickel prices are likely to support all nickel plays,” they add.





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