Is copper on the way to giving nickel a run for its money?
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Nickel has been a standout performer this year, but now it looks as if it could soon be be copper’s time in the sun.
RBC Capital Markets says Australian base metal producers are starting to perform better thanks to stronger commodity prices.
But copper looks as if it’s now playing catch-up to nickel.
In a client note this week, RBC mining analyst Paul Hissey noted that ASX-listed base metal providers had performed roughly in line with expectations, but both the nickel and copper markets had been affected by government actions.
Months of speculation that Indonesia would ban the export of nickel ore has culminated in the country now planning to bring it into effect on New Year’s Day 2020 — two years earlier than planned. Indonesia’s exports are 8-10 per cent of global supply.
This has been a key driver in the share price performance of nickel stocks.
Copper, however, has been hit by a more global crisis: the US-China trade war. RBC said the introduction of tariffs had impacted sentiment in the market.
But it argued copper would perform better in the longer term due to the looming supply crunch.
“We maintain a constructive view on copper over the long-term underpinned by a supply deficit from 2024,” Hissey said.
“This will require higher prices to incentivise supply to feed an increasing demand thematic.
“This trajectory may be tempered, however, by ongoing uncertainty given trade tensions and potential impact to growth.”
RBC has set a long-term copper price of $US3.50 ($5.15) per pound. The copper price is currently sitting at around $US2.61 per pound.
However, spot nickel prices are well ahead of RBC’s long-term target right now. The market price is around $US7.70 per pound, but RBC expects nickel to trade around $US5.90 per pound in FY20 and $US6.25 per pound in FY21.