SPECIAL REPORT ON NICKEL (MCX)

COMMODITY RESEARCH DESK

 

Details about Nickel:

Nickel is a natural element obtained from the core of the earth. It has silver white colour with a shining base and golden tint in it. Nickel is said to be useful for its properties of being ductile and corrosion resistant. Nickel is extracted from two ores magmatic sulfides and laterites. It is a corrosion-resistant metal & its alloys contributes to many aspects of modern life & so its demand is sustainable for many years.

General Uses of Nickel:

Nickel is widely used in making alloys apart from its use in transport, aerospace, marine, architectural and consumer applications. In particular it is used for making utensils, coins, magnets and other metals. It is specifically used for plating and that plating polish is called German silver. Stainless steel is the most important alloy of nickel which is further used in making utensils, equipments, chemical plants and food processing units as shown in the pie chart.

Industrial Uses & Consumption of Nickel:

Major Producers of Nickel:

 

Nickel production....

Strong world economic growth until 2007 supported rising production of primary nickel metal. In 2007 world primary production stood at 1.416 million tonnes. However, the economic crisis led to lower worldwide nickel production in the period 2008 to 2009 and production of primary metal declined to 1.32 million tonnes in the latter year. Production rapidly recovered in 2010 to 1.446 million tonnes and increased further to 1.589 million tonnes in 2011. 

On an annual average The growth in production between 2001 and 2011 was 3.7%. A new product started to be produced in China in 2005 and that was Nickel Pig Iron (NPI) in different forms and grades. Production increased slowly in the first few years but in 2010 production was estimated at over 160,000 tonnes and in 2011 production could be has high as around 250,000 tonnes.

Demand and Supply Chart of Nickel:

 

Fundamental reasons for Nickle’s Price rally:

 

Nickel Rally Accelerates on Indonesian Nickel Ore ban & New Caledonia Supply Disruption

·   In January, Indonesia implemented an export ban on mineral ore including Nickel ore which has tightened supplies from the world’s leading producer.

·   The conflict between Ukraine & Russia has led to concern that Internation sanctions could affects Russia’s Nickel export.

·   Recently, disruption of production in Goro Nickel operations in New Caledonia has put further strong pressure on Nickel’s price. 

Description:

Closure by Vale SA, world’s second biggest Nickel producer in New Caledonia is the most recent addition to the list of supply disruptions that has hampered the nickel market since the beginning of the year. New Caledonia is currently the world’s sixth-largest nickel producer. The plant closure was not planned but has to shut down because of result of a spillage of acid containing solution.

The significant supply concerns led the Nickel prices to surge. The Nickel price has increased by more than 45% since the beginning of the year & now reached the highest level since early 2012, closed to USD $22,000/mt. furthermore, the strong nickel rally has gained some support from the recent Chinese stabilisng economical indications & china’s demand for the commodity.

If the suppy disruption in New Caledonia is solved quickly, we could see a short term correction in the nickel’s price. The same goes for an easing of tension between Ukraine & Russia (what is currently priced in the nickel market).

However, the supply tightening in Indonesia is likely to be felt for sometimeto come. In combination with furthe stabilisation in China & gradual recovery in global economy, further upside potential for nickel prices on a medium-term horizon can be expected.