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ANALYSIS

Nickel prices test bottom, wait for rebound


Nickel prices have touched the bottom after a drop in the fourth quarter, but now it is the moment for rebound, however, analysts do not expect a significant rally in prices, like in 2014.

According to a consensus-forecast, prepared by RIA Novosti, the average nickel price will increase 23% to U.S. $17,900 per tonne.

Since the introduction of a ban on ore exports by Indonesia in January 2014, nickel prices have rallied 37% to $19,800 per tonne from $14,500 per tonne within five months, which was the highest point for the last two years. Since September 2014, the prices have started to decrease and slid to the current level of $14,600 per tonne on the London Metal Exchange (LME).

"In December 2014, the metal price continued the drop and reached $14,900 per tonne at the end of the month due to strengthening of the U.S. dollar and decrease in oil prices, which led to investors' flee from commodities, including nickel", metals giant Norilsk Nickel said in an annual report.

Analysts forecasts for 2015:

Credit Suisse - $17,625

"Sberbank CIB" - $17,500

Deutsche Bank - $19,125

Societe Generale - $17,125

ABN AMBRO Bank - $18,000

Price on the level of cash cost

Under the most pessimistic scenario of investment company BCS, the nickel price will remain at the level of production costs.

"The market managed to adapt to Indonesian ban very quickly. We supposed that the nickel price was not likely to fall below $20,000 per tonne, because Indonesia had accounted for around 20% of global supply. It turned out that China and other markets are very mobile. The reserves continue growing, the market is not balanced and the overall situation is tough. The price is likely to hover in the range of $14,000-16,000 per tonne, the level of production cost", said BCS Analyst Kirill Chuiko.

"The situation on the base metals market is not simple. It is mostly due to strong dollar, high stocks and increased production in China. The price dynamics on the copper, lead and nickel markets is the worst. The copper stocks at LME have already increased by 30% as compared with the fourth quarter of 2014, nickel stocks grew 8%, and the growth will continue", according to analysts at RIA Rating.

The moment for rebound

However, the analysts of Credit Suisse forecast nickel prices to grow moderately in 2015 and will total $17,625 per tonne in average, in 2016 - the price will average at $20,000 per tonne picking in the second half of the year at $22,000 per tonne.

"The Indonesian ban remains in place and was recently announced as official. At the same time, we do not expect a turbulent growth in the medium term. Lateritic nickel ore mining in Philippines bet the expectations and provided with high-grade raw materials", the analysts said.

According to Credit Suisse analysts, the nickel market will be balanced in 2015. There will be enough raw material for China to produce 350,000 tonnes of nickel pig iron this year. Moreover, the lateritic ore stocks at Chinese ports, which amounted to 21 million tonnes in December, is likely to stimulate exports. In 2016, the experts expect a small deficit of about 50,000 tonnes, but it is unlikely to influence the price.

According to data of International Nickel Study Group (INSG), primary nickel production totaled 1.93 million tonnes in 2014, as compared to 1.94 million tonnes in 2013.

Sberbank CIB analysts suppose that the nickel prices have touched a bottom of $14,500-15,000 per tonne, and now the time comes for price to increase to its real level of $16,000 per tonne. Sberbank CIB forecast for 2015 stands at $17,500 per tonne, and $18,000 per tonne in 2016.

"Investors still wait for combination of factors, namely depletion of nickel ore stocks in China, extension of export ban, as well as the lack of progress in creation of processing capacitates in Indonesia, which may together lead to nickel deficit in 2015-2016", the analysts said.

19.02.2015 19:34


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