Should You Bet on a Nickel Rally in 2015?

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Submitted by Arturo Garcia as part of our contributors program.

Should You Bet on a Nickel Rally in 2015?

Base metal, collectively, was weighed down by a series of lows in 2014. Even nickel, the best-performing entity in the segment last year, was a bit precarious in the third quarter, and managed only to resurge before the year reached conclusion.

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Analysts and market observers take different perspectives over nickel’s future, but they all agree that prices would continue to rise in the first quarter of 2015.

Some economists also believe that the looming global supply deficit — which may be in the cards by the second quarter — is not bad as expected. Nickel would maintain its strength so long as inventory levels on the London Metal Exchange (LME) stays high, and as China’s imports remain strong.

Nickel is predicted to maintain its strength in 2015, and remains a strong contender to be this year’s best performer of the industrial metal segment.

ANZ commodities analyst Daniel Hynes sees a brighter future for base metal as a whole despite poor performance in 2014, pinpointing the third quarter as the beginning of its recovery.

“We see supply growth being limited in much of the base metal markets, which means that any surpluses will be relatively limited as demand weakens, and some commodities like nickel and zinc are going to show significant deficits (lower stockpiles) this year,” he said.

Experts say that copper, zinc, and aluminum will join nickel’s rise, making base metal one of the better performing commodity subsectors.

Standard Charter is optimistic on copper’s future and sees a steady recovery at an average of $US6,950 a tonne. The forecasting firm points at increasing demand as main driver why aluminum is finally finding its way to recovery.

The average price forecast for aluminum in 2015 on LME is $US2,170 a tonne, up from the average 2014 price of $US1,910.

The supply squeeze in zinc would strengthen its price amidst closure of major producers, particularly in the Australian region. The shortfall in supply would force its price to go up, Glencore CEO Ivan Glasberg predicted.

Bank of America Merrill Lynch once said that structural improvement of fundamentals would soon bolster up bullish expectations for industrial metals in 2015.

She stated that it was essential to see that the slowdown in China’s economy had radically affected the growth momentum of base metal. In the past, base metal reacted to China’s growth alone, but this isn’t the case anymore since the Asian superpower is no longer the sole price driver.

On nickel supply’s future

The forthcoming supply deficit has altered the global nickel commerce, leaving consumers with no choice but to import ore from lower-quality supplier like the Philippines. Fortunately, there have been many changes in the supply segment that could alleviate the ailing supply.

Poseidon Nickel’s Lake Johnston Reserve would be resuming operations after Norlisk Nickel’s acquisition in a $1 million deal last year.

In Canada, the local government is currently in talks with US nickel mining Cliffs Natural Resources Inc. (CLF) on the possibilities of restarting the Bloom Lake iron-ore reserve in the northeastern region of Quebec.

Nascent Russian explorer Amur Minerals Corporation (AIM: AMC) is awaiting the Russian government’s approval of its pre-production license, which is now on the last stage of assessment. Obtaining authorization from the Presidential Office would give permission to the Russian firm to commence its drilling on the Kun-Manie Reserve, one of the most promising mining prospects in the world today.