Nickel and dimed just got more expensive

PF Digital Dispatch

Don’t look now, but those who dabble in nickel may be getting hit hard soon by additional price increases if – as expected – the Chinese market has a surge in the demand for the metal.


Don’t look now, but those who dabble in nickel may be getting hit hard soon by additional price increases if – as expected – the Chinese market has a surge in the demand for the metal. Reports say that China (which accounts for 30% of worldwide usage) may soon see an 18.6% leap in demand, or roughly 510,000 tons.

Talk about price spike!

Analysts at Desjardins Securities say they expect nickel to rise to $9 a pound this year, and $10 a pound in 2011. The demand problem has been augmented by ongoing strikes at Vale Inco’s plants in Canada, unacceptable nickel laterite, as well as an increased production in stainless steel, Desjardins told clients.

They say the nickel supply has been further exasperated by a lack of quality in nickel laterite ore, which is primarily imported to China for use in nickel pig iron by stainless-steel mills.

“According to the CRU, much of the material imported in 2009 had an unsuitable nickel/iron composition,” says Desjardins. “CRU estimates that of the 9.3 thousand tons of ore currently stockpiled at Chinese ports, roughly 80% is unacceptable.”

Nickel prices have skyrocketed in 2010, registering gains of more than 35% in the first quarter and outperforming all other metals traded on the London Metal Exchange. Compare that to a 3.9% increase in the price of copper, 2.7% for aluminum, 1.5% for gold, and 3.5% for silver.

Nickel for spot delivery at LME was $24,960 a ton as of March 31, up from $18,452 on Dec. 31, 2009. But after hitting a 52-week high of $25,011 a ton on April 1, the price went down some over the last two trading sessions and currently stands at $24,678.

To make matters worse (is that possible?), thieves are getting in to the act, and no we don't mean the government. Hundreds of tons of nickel and copper were stolen from a Liverpool, England warehouse in May, the latest in a rash of commodity heists spurred by higher prices. The Wall Street Journal reported that the metals were taken from Liverpool's docklands area that was owned by warehousing company Henry Bath & Son, a unit of J.P. Morgan Chase & Co.

But help may be on the way.

China's largest nickel producer, the Jinchuan Group, has offered $150 million to buy Canadian nickel miner Crowflight Minerals’ assets in Manitoba and Ontario, which could spur production. Japan’s Sumitomo Metal Mining announced that it will increase its nickel production by 23% to 41,000 tons this fiscal year. In addition, Australia miner Mincor Resources says it is exploring the reopening of its Miitel mine in Western Australia, which it had shut down following a sharp slump in nickel prices in 2008.