LME Nickel Hits Five-week High on Indonesia Ban, China Shortfall

LME Nickel Hits Five-week High on Indonesia Ban, China Shortfall

Three-month nickel on the London Metal Exchange (LME) was on the rise Wednesday and Thursday following Indonesia's reaffirmation of its ore export ban, as well as concerns about an ore shortage in China.

The base metal's gains began after Bambang Adi Winarso, senior adviser to Indonesia's coordinating minister for economic affairs, said Wednesday that the country's ban on unprocessed ore exports will stay in place. Specifically, LME nickel for delivery in three months rose $134 to hit $16,279 per metric ton (MT), as per Bloomberg.

It might seem odd that comments about the ban had an effect on the nickel price — after all, it's been in place since January — but given that some market participants have speculated that the country will not retain it, any confirmation that it will stay is important.

As mentioned, nickel's positive price run continued Thursday. At that time, three-month LME nickel jumped to $16,380 per MT, its highest since October 15, later dipping back down to $16,217, according to Reuters.

Pushing the metal up was news that Chinese stainless steel producers, which are currently importing lower-quality ore from the Philippines "to supplement their stockpiles," may ultimately run short of the material. Joel Crane, a Melbourne-based Morgan Stanley analyst, told Reuters, "[t]he chances of a supply gap are fairly high," though he added, "I don't think it's going to be as acute as consensus price forecasts suggest."

More gains to come?

Nickel has had a topsy-turvy year thus far. Though Bloomberg notes that it's up 16 percent for the year, the metal has slumped from the highs it hit earlier in 2014, when the Indonesian ban was fresher and the Philippines was talking about implementing a similar ban. As a result, it's tough to say what's next for the metal.

Of course, that hasn't stopped some analysts from making guesses. Last month, analysts at Commonwealth Bank cut their price forecasts for nickel, predicting a surplus for the metal.

On the flip side, Citigroup (NYSE:C) recently forecast a deficit of 62,400 MT for 2015, followed by a deficit of 103,600 MT in 2016. Meanwhile, Bloomberg Businessweek states that Goldman Sachs Group (NYSE:GS) has increased its price forecast for nickel to $20,000 per MT from $18,000.

As the year draws to a close, more market watchers are likely to come out of the woodwork with predictions, and a clearer picture may emerge.

 

Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.

Related reading:

After All the Bans, a Surplus on the Way for Nickel?

LME Nickel Hits Five-week High on Indonesia Ban, China Shortfall from Nickel Investing News

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