The 2014 Metals Outlook: Nickel

Australian Mining has investigated the current state of Australian metals and looks into how they will perform in the coming year. In the third part of this five part series we look at nickel. 

The nickel industry has always been one of sharp busts and booms, with the busts now lasting longer and longer.

To sum up the sector in a single word – volatile.

After an astounding leap in revenues in 2006-07, where it skyrocketed 132.9 per cent after shrinking 5.7 per cent the previous year, nickel has undergone a series of sharp price corrections, seeing an annualised fall of 12.1 per cent in revenues from 2008 through to this year.

This was due to prices retreating from unsustainably high levels.

However after two years of serious gloom for the sector, following another brief spike in 2010-11, nickel is predicted to grow again, according to IBISWorld reports.

Western Areas CFO Joe Belladonna explained that this is mostly likely due to the forecast squeeze on global nickel supplies, particularly as the higher grade, easier to process nickel sulphide supply swindles.

“Nickel laterites and nickel pig iron are not capable of filling this sulphide void at a time [when]the metal is increasingly being recognised and sought for its strategic application in stainless steel and other products with extraordinary performance characteristics,” Belladonna said.

Due to this “industry performance is expected to improve during the five years through to 2017-18, with revenue rising at an annualised rate of 5.2 per cent to total $3.13 billion in 2017-18,” IBISWorld stated.

This will be driven by trends in US dollar nickel prices, the value of the Australian dollar, and the volume of nickel production.

IBISWorld expanded up on Belladonna’s forecast for the metal, adding that “growing steel demand in key consuming countries such as China will lift demand for nickel, putting upward pressure on nickel prices; although global output of nickel is expected to be sufficient to meet demand, more production will come from higher cost laterite ore, in turn putting a floor under nickel prices”.

However it did note that nickel output is expected to grow more slowly, reflecting producer caution due to nickel’s historic volatility, which will result in reduced stocks and in turn upward pressures on price.

Earlier this year Glencore was forced to write down billions in Xstrata nickel assets, writing down its US$ 5billion Koniambo venture in New Caledonia after Xstrata last year closed its Cosmos nickel mine.

Approximately two thirds of nickel exported from Australia heads to China, with Canada accounting for the remainder.

Belladonna pointed to 2015 as the pinch point for quality nickel sulphides, forcing the industry to look to lower grade deposits and new technology to meet demand.

“Technological advances in nickel processing [will allow] previously uneconomic deposits to be mined, with mixed success,” IBISWorld explained.

However the truth for the metal is unavoidable, according to IBISWorld: “The nickel ore mining industry is declining.”

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