Spare me a nickel
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.