Last month, when Indonesia surprised nickel market participants by going through with its plan to ban unprocessed ore exports, many investors were left wondering whether the decision would push nickel prices up.
Thus far, the answer has been yes. And encouragingly, Vale (NYSE:VALE), the world’s second-largest nickel producer, believes that the base metal will continue to perform well in the next couple of years, climbing “significantly” in 2015.
The gain so far
Soon after the ban was confirmed, Bloomberg reported that London Metal Exchange (LME) nickel for three-month delivery had risen to $14,253 per metric ton (MT), its highest price since December 30, before closing at $14,210 per MT. Commenting on that increase, Stephen Briggs, an analyst at BNP Paribas, said, “[t]he price is more likely to go up than down, even after this rise that we’ve had.”
Since then, Briggs’ prediction has been justified. Bloomberg said in another article that three-month LME nickel climbed to $14,345 per MT on January 27. And, though it sank to $14,200 per MT midway through February, by February 19, Metal Bulletin placed it at $14,500 to $14,535 per MT, noting that it had hit an intraday high of $14,638 per MT.
Most recently, on February 25, Bloomberg noted that three-month nickel on the LME was trading at $14,314 per MT, “heading for a third monthly advance.”
Vale anticipates continued growth
As mentioned, mining giant Vale said recently that it sees nickel’s gains continuing not only in the upcoming months, but also for the next couple of years, particularly 2015. Specifically, the company believes nickel may climb as high as $20,000 per MT.
Justifying that outlook, Peter Poppinga, executive director for base metals at Vale, told Bloomberg, “[i]t is about Indonesia today, everybody knows that. The ore ban is in place and it’s holding, and I think the authorities in Indonesia are very reasonable and very serious about that.”
Explaining why it will take until next year for prices to really get moving, Bloomberg states that the nickel market is still in surplus. Though that surplus is expected to decrease to 41,000 MT this year, down significantly from the 2013 total of 181,000 MT, it won’t be until 2015 that the market slips into deficit — a 36,000-MT deficit, to be specific.
Poppinga gave no word on what Vale thinks will happen with prices if Indonesia changes its mind about the ban. However, given that Saleh Abdurrahman, a spokesman from Indonesia’s Energy and Mineral Resources Ministry, has said the country has no plans to do so, nickel’s positive outlook seems safe for now.
Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.