90 per cent of global nickel miners are making money at current prices, says expert
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For the first time in six years, most global nickel producers are now making money, a senior analyst has told delegates at the Paydirt nickel conference in Perth.
Alto Capital senior analyst Cary Smith said 90 per cent of global nickel production was now economic at current prices of about $US5.60 ($7.91) a pound.
But from 2013 up until very recently that was not the case.
“It has been the longest run where the nickel price has been too low make money,” he said.
“That turned around at the start of the 2018 and now the majority of production around the world is economic at the cash cost level.”
Cash costs include all costs of mining and processing, but don’t consider all costs of running a business, like corporate expenses.
The nickel price has softened in the last few months, but Mr Smith said the outlook was strong.
“A poll conducted by the London Metals Exchange (LME) earlier this month identified nickel as the base metal with the most potential in 2019,” he said.
LME nickel stocks have fallen from 470,000 tonnes in June 2015 to 220,00 tonnes in September this year – a 53 per cent deficit.
Falling stockpiles means more nickel is being consumed than produced – a great sign for nickel producers.
Mr Smith said there is talk about some of those stocks going from Asia to Europe to be held in non-registered warehouses.
“Even if that is true it would only be a small portion of the total amount that has been drawn down,” he said.
“There is also talk that some of the battery manufacturers are stockpiling for future use.
“Either way, it doesn’t matter — it’s a very big positive for the nickel market going forward.”
The US/AUD exchange rate will also continue to be an added bonus for Australian producers over the next couple of years.
And Mr Smith predicts the US China trade war – which has been blamed for falling nickel prices this year — will be resolved before too much damage is done.
“For the next two years my forecast is an average between $US6.50/lb and $US 7/lb ($9.18 to $9.8/lb) — but that is pretty conservative, and could easily reach $US7.50 or $US8/lb ($10.50 to $11.30/lb),” he said.
“I believe the nickel consumption over the next 5 years will more than outstrip growth in nickel supply.”