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Nickel: prices continue to rise

18 June 2014

In the five months of this year the price of nickel increased by more than 50 percent, that is influenced by both force majeure and the prices charged by speculators. The latest increase in nickel prices was due to the leakage of acid in the company of New Caledonia, owned by the second largest producer, the mining company «Vale SA». Said plant produced 2% of the total volume of production in the world. However, the suspension of production will not last more than a month, so that the annual loss will amount to only about 0.2% of world nickel use.

However, there are more substantial reasons for the increase in metal prices. One of them — a ban the export of raw ore from Indonesia, which was approved in January of this year. Given that Indonesia is a supplier of raw materials for the world production of 18−20% nickel, 9−10% aluminum and 3% copper, Indonesian ban a painful blow to consumers. The most negative impact the ban on nickel market — a taboo on the export of raw materials in China has led to an increase in manufacturers' costs, which immediately affected the increase in prices in the production of nickel pig iron. Due to the Indonesian ban metal shortage is going to be very significant, flourishing speculative demand on this basis.

Another important factor — the expectation of sanctions against Russia and depending on this fact nickel supply. The increase in the cost of metal has begun since the discussion of the sanctions. However, «Norilsk Nickel» will only benefit from such an increase in cost. Considering the current data we can say that the annual arrival of the company is about USD 6 billion EBITDA of, of which 50% will go to dividends, 2 billion USD will be spent on kapraskhody, 1 billion USD -… To pay debts. Subsequently, the nickel cost can remain at its present level. As noted by Vladimir Potanin, the price of nickel is unlikely to reach the level of more than 20 thousand USD. Probably, in the next 2−3 years, Indonesia will launch processing facilities for the smelting of nickel, so that after the increase in the cost of the metal can be expected to install the status quo.

However, such a favorable prognosis applies only to nickel, other base metals, positive dynamics is not threatened. Copper and aluminum are at the lowest levels since 2010 and 2009 respectively.

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