Spare me a nickel

Finweek English Edition - - Companies & markets -

WERE THE NICKEL PRICE to stay at its cur­rent el­e­vated lev­els for the rest of the year, An­glo Plat­inum would add an es­ti­mated R5bn to its rev­enues. Al­though a long-term nickel price of the cur­rent or­der is un­likely, it’s none­the­less a fair in­di­ca­tion of the mas­sive price sen­si­tiv­ity that plat­inum min­ers have con­cern­ing their so-called “mi­nor” met­als.

“Nickel is now our third most im­por­tant metal,” says David Brown, CEO of Im­pala Plat­inum, which re­fines around 14 000 tons of nickel a year. “Pal­la­dium is a dis­tant fourth.” That comes af­ter the spec­tac­u­lar ap­pre­ci­a­tion in the nickel price (see graph), par­tic­u­larly this month. At the time of writ­ing, nickel was test­ing all-time highs of US$50 000/t from about $14 000/t a year ago.

Higher nickel prices are be­ing driven by strong de­mand for stain­less steel, which is given its non-rust fea­tures by the ad­di­tion of nickel. Cur­rently, Chi­nese de­mand for stain­less steel means there’s ex­tra pres­sure on nickel.

John Meyer, an an­a­lyst at Nu­mis Se­cu­ri­ties in Lon­don, says the com­pany is con­sid­er­ing lift­ing its 12-month av­er­age nickel price from its cur­rent level of $22 046/t. How­ever, there are dan­gers in this. “Nickel prices tend to be ex­tremely volatile and, con­se­quently, a sharp cor­rec­tion down­wards is pos­si­ble.” None­the­less, prices may av­er­age at “very high lev­els” ver­sus his­toric prices, Meyer says.

What does that mean for plat­inum group metal pro­duc­ers? Cer­tainly an­other boost to earn­ings. JP Morgan has a fore­cast av­er­age price of $17 000/t for nickel this year. How­ever, were nickel to av­er­age only half its cur­rent value – $25 000/t – the $8 000/t vari­ance be­tween fore­cast price and ac­tual price would add an­other R7 to R8/share to An­glo Plat­inum’s earn­ings from its 30 000 tons/year of nickel pro­duc­tion.

NICKEL... SKY­WARD FOR­EVER?

Source: I-Net Bridge

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