Nickel - Major Correction, where to next ?

[ScrappyO]

Nickel up 7% could also be a good day for nickel shares.

[fihr]

Well MCR is definitely up - over $3.80 - its been stuck around $3.60 for a while. Gapped up very well today. SMY up too, though didn't gap. AGM up initially and dropping back to 73 cents. But AGM looks like it is now establishing a steady uptrend, at a more sustainable rate than the last time. JBM is not up much. It was higher a couple of days ago.

So at the moment, its hard to say that all nickel stocks are following the nickel price. It's a mixed bag. But in the longer term, analysts seem to be looking a bit more favorably upon nickel - it seems that it is currently perceived as having corrected, so people feel more comfortable gradually buying back in.

I am currently writing calls on some of my JBMs. Happy to sell some between $17.50 to $18 as need the money elsewhere. The call premiums are quite reasonable income in the meantime.

[fihr]

Maybe it has just taken a day for the reaction to the nickel price rise to happen. Nickel shares well up this morning - MCR gapped up second day in a row, to start over $4.00; AGM continuing up, at 75.5 to 77 cents; JBM up over $17 - $17.11 as I speak. (Maybe my $17.50 calls will get exercised this month - from the trend line it is possible.)

But the guys at http://www.estainlesssteel.com/stain...eel-news.shtml say they don't know why the nickel prices are rising. They seem cynical about figures from the World Bureau of Metal Statistics that there was a nickel deficit in the first half of 2006. Perhaps this is another flash in the pan due to temporary optimism caused by the Fed's rate cut???

[Heavy Metal]

But the guys at http://www.estainlesssteel.com/stain...eel-news.shtml say they don't know why the nickel prices are rising. They seem cynical about figures from the World Bureau of Metal Statistics that there was a nickel deficit in the first half of 2006. Perhaps this is another flash in the pan due to temporary optimism caused by the Fed's rate cut???

These guys have a vested interest in keeping nickel prices low (and constant) so it's not surprising they're cynical.

If they take their blinkers off it's quite easy to see why nickel prices are rising. The market is finally realising that it's only Europe where nickel demand is falling, about 85% of the LME global available nickel stockpile is held at three European warehouses. Elsewhere in the world demand is still robust. At $12 the nickel pig iron producers in China were either going bust or diverting production so nickel supplies there were starting to be constrained.

But probably the kicker was the Fed rate cut, encouraging speculators back into the market, buying up commodities and in turn inducing a lot of short covering.

So nickel is starting to become fair value again at $15 - $18, and well done anyone who had the foresight like myself to buy nickel stocks last month when it was achingly obvious nickel was oversold are doing very very well, 30% - 50% return in one month ain't bad eh.... AGM target price 90c....

[whiteheron]

Heavy Metal

People want quality products and Nickel stainless is the best
This pig iron stainless is from all accounts much inferior and apparantly not economic to produce if the Ni price is below US $12 per pound
As I see it this pretty much assures a base Ni price of US $12 to $15 or so, around the figure that it is currently and with spikes above this if there is a shortage or futures funds etc trying to manipulate prices

Just my view
My Ni stock is MCR, purchased for the poultry sum of 66c
Equal best stock for me

[macduffy]

Interesting article in today's Australian.

BHP holds key to nickel surgeFont Size: Decrease Increase Print Page: Print Kevin Andrusiak | September 24, 2007
AFTER more than two years in charge of Australia's best nickel assets during a period of rising commodities prices, BHP Billiton believes it might finally have the key to unlocking the nickel production chain built by WMC Resources.

BHP wants to improve output to capture a bigger market share of heady Asian demand for the metal.

The move comes as the Australian currency surfs a commodities export cycle boom that some analysts believe could run for 15 or even 25 years and take the dollar to eventual parity with the US dollar.

BHP Nickel West president Marcelo Bastos revealed a new strategy of "go concentrate long" for the global mining giant for its suite of nickel assets now controlled by the company after the 2005 takeover of WMC for $9.2 billion.

At the time, most market attention was focused on how BHP would lift production at the giant Olympic Dam mine in South Australia while the nickel assets - comprising chiefly the Kwinana nickel refinery, Kalgoorlie nickel smelter, Mt Keith open-cut mine, Leinster underground mine and Kambalda nickel concentrator - remained largely out of the spotlight with many expecting BHP to use its global experience to successfully de-bottleneck many of the operations.

However, since the takeover, BHP has never been able to improve on the output levels of nickel matte from the Kalgoorlie nickel smelter or nickel metal from the Kwinana nickel refinery, both in Western Australia, and instead of focusing on bottlenecks at each site will instead demand the production be ramped up at its three nickel concentrators at Mt Keith, Leinster and Kambalda.

Any excess not used by either the refinery or smelter can then be easily on-sold to BHP customers.

"We don't have real cases where we can expand production (at the moment)," Mr Bastos said. "We have examples of where we can expand production."

Mr Bastos also signalled that the company had embarked on a "new wave" of growth for its nickel assets that was "much more related to market conditions" as the company predicted the nickel price could be sustained at current levels, or move higher, over a long period.

He added that while merger and acquisition activity remained on the radar, the global mining giant would put more faith in achieving results from a $120 million, three-year nickel exploration budget.

"There is a low level of nickel stock in the market," he said.

The new strategy puts pressure on the Kwinana nickel refinery and Kalgoorlie nickel smelter in particular to keep pace with the supply of concentrate from BHP's own nickel mines and nickel ore from a number of third parties which is delivered to the Kambalda nickel concentrator.

Refinery acting general manager Simon Hay said that while he hoped to push past the 750,000 tonnes of nickel concentrate the facility refined each year - the same level achieved by WMC - he could not put a figure on what soon might be possible.

"We want to be bigger - we know we can sell every tonne of nickel we produce," Mr Hay said.

"The challenge for us is to raise that figure. The approach is long term.

"I'm not saying that WMC didn't have that approach, but I certainly see it in BHP."
Kwinana nickel refinery general manager Brett Swayn admits there have been reliability issues at the plant, which has prevented it from reaching the rated capacity of 65,000 tonnes a year.

The refinery takes about two-thirds of the 100,000-110,000 tonnes of nickel matte produced at the Kalgoorlie smelter with BHP preferring to sell the rest to the Kwinana refinery's overseas competitors because of capacity restraints at the refinery.

Production last financial year at the refinery was 54,000 tonnes of nickel metal, with about 5000 tonnes lost due to scheduled maintenance work.

"We want to take all of the smelter's output ... we have got to make sure we are competitive with the Chinese," Mr Swayn said.

"We know our competitors are improving and we need to keep up."

[zac]

From 'The Australian'
There's more nickel than Jubilee mines
November 5, 2007

THE DRUM

THE gold price may have hit $US800 an ounce last week, but there's no question that nickel was the hottest commodity in the Australian market. Xstrata's surprise $3.1 billion bid for Jubilee Mines put a rocket under the sector, which has been consolidating rapidly since BHP Billiton's $9.2 billion purchase of WMC Resources in 2005. "We are bullish on stainless steel," Xstrata chief executive Mick Davis said. "We see no reason why that should change." Jubilee had long been regarded as one of the world's premier independent nickel companies given its repeated exploration success surrounding its Cosmos mine in Western Australia. Like platinum, the nickel sulphide game is all about controlling the smelters and refineries. The world's top five nickel sulphide producers - Russia's Norilsk, Brazil's CVRD, BHP Billiton, China's Jinchuan and Xstrata - control 80 per cent of production, giving them increased pricing power.

The nickel price, which reached more than $US50,000 a tonne in May, has taken a severe hit in recent months. Last week, it was trading near $US32,000 a tonne.
But analysts expect the nickel price to improve over the remainder of the year since the makers of stainless steel will be forced to restock after taking a breather over the last few months.

Western prospects

The leading contender for the title of "the next Jubilee" looks to be Western Areas. Like Jubilee, Western Areas has managed to gain control of an entire nickel province - the Forrestania nickel belt about 400 kilometres east of Perth. The company's Flying Fox mine produces a similarly high-grade, high-iron concentrate which helps offset ore with higher impurities when blended in a smelter. "We don't see any reason this province here will not rival Kambalda in the years to come," the Western Areas managing director Julian Hanna says. "The deposits are getting larger and higher-grade [the deeper] we go." Western Areas expects to produce 8000 tonnes of nickel next year, rising to 10,000 tonnes in 2009 when it starts production from a second mine at Diggers South. It has several other potential mines, including New Morning/Daybreak, Cosmic Boy and the recently discovered Spotted Quoll deposit. Although it looks like a prime takeover target, there are a few factors preventing an immediate sell-out. Chairman Terry Streeter owns 19.5 per cent of Western Areas and is happy to watch the company grow. Also, unlike Jubilee, which signed one-year offtake agreements, Western Areas has agreed to sell its first 75,000 tonnes of nickel - at least five years' production - to Norilsk.

Russian input

Norilsk is now a major player in WA following its $C6.8 billion ($7.8 billion) takeover of Canada's LionOre earlier this year. The deal also gave the Russian company a 19.8 per cent stake in Breakaway Resources, which owns some nickel tenements LionOre divested to its old exploration team. Breakaway is an early-stage exploration play. But the added risk brings with it the potential for more upside in the share price. Breakaway has initially focused its attention on the Scotia prospect, about 15 kilometres north of an old nickel mine, where it's been drilling for the last four or five months. Last week, it announced a promising intersection of 27 metres at 1.8 per cent nickel from a depth of 143 metres. Some of Breakaway's projects are already tied up in offtake agreements with Norilsk but it's a free agent on the Scotia project. Breakaway wants to start drilling on several other prospects as well but managing director Peter Buck notes: "A company our size can only do so much at once."

Mirabela's plans

Nickel sulphides are very rare compared to lower-grade laterite projects, so there haven't been many big discoveries in the last decade. But Mirabela Nickel has managed to break that trend with its $US263 million ($286 million) Santa Rita project under construction in Brazil. Mirabela has a measured and indicated resource of more than 400,000 tonnes of contained nickel, albeit at a relatively low grade of 0.61 per cent. Mirabela executive director Craig Burton says the deposit is more comparable to BHP's massive Mt Keith open pit mine than the higher-grade underground mines in WA. Santa Rita expects cash costs of about $US3.34 a pound before byproducts. Mirabela intends to start production in 2009 at 18,500 tonnes a year, with room for further expansions and the possibility of building a smelter on-site. CVRD owns 9 per cent of the company but Mirabela has yet to sign an offtake agreement, keeping its options open. Directors don't want to consider takeover approaches at present. "Our aim is to bring this project onstream and unlock the full value for our shareholders," Burton says.

jfreed@smh.com.au

[jdg]

damn those nickel warehouse stocks just keep rising. i've been waiting for the drawdown after stainless steel destocking. it has to be just around the corner. when it happens, i would expect it to happen quickly.
-j

[tricha]

damn those nickel warehouse stocks just keep rising. i've been waiting for the drawdown after stainless steel destocking. it has to be just around the corner. when it happens, i would expect it to happen quickly.
-j

Dam Pig iron is the problem jdg, it will flood the market. if it was not for bloody pig iron , nickel would be fetching 100,000 a ton right now.

China's Stainless Steel Output to Reach 9 Million Tonnes This Year
By Ginger Ding and Ida Chen
28 Mar 2008 at 10:10 AM GMT-04:00

HONG KONG (Interfax-China) -- China's stainless steel output is expected to grow by nearly 25% year-on-year to 9 million tonnes this year, a senior official from a major privately owned Chinese stainless steel mill told Interfax in Hong Kong today.
China produced 7.206 million tonnes of stainless steel in 2007, up 36% from the previous year, while the country's apparent consumption grew by 10.59% year-on-year to 6.58 million tonnes last year, down 3.61 percentage points from the previous year, according to statistics from the China Stainless Steel Enterprise Association.

"China's nickel pig iron production will maintain stable growth over the next few years, as domestic stainless steel consumption is due to grow by an average of 10% per annum," Jiang Xinfang, president general of Tsingshan Holding Group, China's largest privately owned stainless steel mill, said.
China's nickel pig iron output soared over the past few years, with the amount of nickel metal used for nickel pig iron production surging 246% from 26,000 tonnes in 2006 to 90,000 tonnes in 2007.
Jiang predicts that China's laterite ore imports will reach an average of 1.21 million tonnes per month this year, most of which will supply nickel pig iron capacity expansion projects across the nation. However, domestic nickel pig iron producers will still face challenges such as facility upgrades, environmental problems, soaring freight rates and a potential export tax rise on Indonesian laterite ore.
China imported 15.56 million tonnes laterite ore in 2007, skyrocketing 311.98% from the previous year, which was worth a total of $2.4 billion, according to the General Administration of Customs.
In November last year, Tsingshan Holding Group entered into a join-venture agreement with Indonesian state-controlled PT Antam Tbk to jointly construct an integrated nickel ore mining, smelting and stainless steel project.
The JV will develop a nickel deposit, as well as an associated power plant, a nickel pig iron plant and a stainless steel plant with a designed annual capacity of 300,000 tonnes, on Obi Island, North Maluku Province, Indonesia. The project is scheduled to commence operations in 2011, Jiang said.
Tsingshan Holding Group, headquartered in the city of Wenzhou in eastern China's Zhejiang Province, has an annual production capacity of 1 million tonnes of stainless steel, 700,000 tonnes of long products and steel strip, 30,000 tonnes of steel pipe and 20,000 tonnes of stainless steel wire per annum.
© Interfax-China 2008. For more intelligence on Chinese metals and mining, contact David Harman in Hong Kong at david.harman@interfax-news.com.

[tricha]

Dam Pig iron is the problem jdg, it will flood the market. if it was not for bloody pig iron , nickel would be fetching 100,000 a ton right now.

China's Stainless Steel Output to Reach 9 Million Tonnes This Year
By Ginger Ding and Ida Chen
28 Mar 2008 at 10:10 AM GMT-04:00

HONG KONG (Interfax-China) -- China's stainless steel output is expected to grow by nearly 25% year-on-year to 9 million tonnes this year, a senior official from a major privately owned Chinese stainless steel mill told Interfax in Hong Kong today.
China produced 7.206 million tonnes of stainless steel in 2007, up 36% from the previous year, while the country's apparent consumption grew by 10.59% year-on-year to 6.58 million tonnes last year, down 3.61 percentage points from the previous year, according to statistics from the China Stainless Steel Enterprise Association.

"China's nickel pig iron production will maintain stable growth over the next few years, as domestic stainless steel consumption is due to grow by an average of 10% per annum," Jiang Xinfang, president general of Tsingshan Holding Group, China's largest privately owned stainless steel mill, said.
China's nickel pig iron output soared over the past few years, with the amount of nickel metal used for nickel pig iron production surging 246% from 26,000 tonnes in 2006 to 90,000 tonnes in 2007.
Jiang predicts that China's laterite ore imports will reach an average of 1.21 million tonnes per month this year, most of which will supply nickel pig iron capacity expansion projects across the nation. However, domestic nickel pig iron producers will still face challenges such as facility upgrades, environmental problems, soaring freight rates and a potential export tax rise on Indonesian laterite ore.
China imported 15.56 million tonnes laterite ore in 2007, skyrocketing 311.98% from the previous year, which was worth a total of $2.4 billion, according to the General Administration of Customs.
In November last year, Tsingshan Holding Group entered into a join-venture agreement with Indonesian state-controlled PT Antam Tbk to jointly construct an integrated nickel ore mining, smelting and stainless steel project.
The JV will develop a nickel deposit, as well as an associated power plant, a nickel pig iron plant and a stainless steel plant with a designed annual capacity of 300,000 tonnes, on Obi Island, North Maluku Province, Indonesia. The project is scheduled to commence operations in 2011, Jiang said.
Tsingshan Holding Group, headquartered in the city of Wenzhou in eastern China's Zhejiang Province, has an annual production capacity of 1 million tonnes of stainless steel, 700,000 tonnes of long products and steel strip, 30,000 tonnes of steel pipe and 20,000 tonnes of stainless steel wire per annum.
© Interfax-China 2008. For more intelligence on Chinese metals and mining, contact David Harman in Hong Kong at david.harman@interfax-news.com.

U think nickel stocks are cheap now and it's safe to dip your toes back in, think carefully.