Nickel - Major Correction, where to next ?

[tricha]

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

http://www.kitconet.com/charts/metals/base/lme-warehouse-nickel-60d.gif (http://www.kitcometals.com/charts/nickel_historical_large.html#lmestocks_60days)

Citigroup Slashes 2009 Nickel Price Forecast on Lower Demand

By Glenys Sim
Sept. 29 (Bloomberg) -- Citigroup Inc. slashed its 2009 nickel price forecast by 40 percent as new mines will open when demand from stainless steelmakers drop.
The price may average $6 a pound ($13,230 a metric ton) next year, down from an earlier estimate of $10 a pound, analysts Alan Heap (http://search.bloomberg.com/search?q=Alan+Heap&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1) and Alex Tonks (http://search.bloomberg.com/search?q=Alex+Tonks&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1) said today in a report. A global surplus will widen by almost five times in the next two years, they said.
Nickel, mostly used in making rustproof steel, has fallen 48 percent in the past year, as steelmakers use inventories and make products with less metal content. China, the largest consumer of nickel, will buy less this year, an industry official said Sept. 26.
``Demand is under continued pressure from substitution, in particular, substitution of high nickel stainless alloys with ferritic alloys of a lower nickel content or no nickel at all,'' Heap and Tonks said.
The metal for immediate delivery on the London Metal Exchange fell 0.6 percent to close at $16,775 a ton Sept. 26, and averaged $24,549.70 a ton this year.
Shanxi Taigang Stainless Steel Co. and Baoshan Iron & Steel Co., the biggest Chinese makers, are making ferritic products to replace more than 40 percent of their 300 series products, China's Special Steel Enterprises Association said last week. Ferritic products contain little nickel compared with the 300 series products, which typically contain 8 percent nickel.
Global Surplus
Nickel production this year will exceed consumption by about 10,500 tons, Citigroup said. The surplus will widen to 42,500 tons in 2009 and 51,000 tons in 2010 on new supply from Cia. Vale do Rio Doce (http://www.bloomberg.com/apps/quote?ticker=VALE5%3ABZ)'s Goro project and Onca Puma mine, and BHP Billiton Ltd's Ravensthorpe project, the bank said.
The bank raised its longer-term forecast to $8 a pound from $6.50 in 2011 because of rising costs.
``The short term outlook for nickel prices is bleak'' because stainless steel production has remained at weak levels, Macquarie Group Ltd. said today in a report. Unprofitable producers have cut output this year, though a small surplus of about 6,000 tons remains, analysts including Jim Lennon (http://search.bloomberg.com/search?q=Jim+Lennon&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1) wrote in the report.
The Australian bank expects an excess of 16,000 tons in 2009 and 35,000 tons in 2010. The bank forecasts prices at $8.63 a pound in 2009, $8.50 a pound in 2010 and $7 a pound in 2011.
To contact the reporter for this story: Glenys Sim (http://search.bloomberg.com/search?q=Glenys+Sim&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1) in Singapore at gsim4@bloomberg.net (gsim4@bloomberg.net)
Last Updated: September 28, 2008 23:36 EDT

[tricha]

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

http://www.kitconet.com/charts/metals/base/lme-warehouse-nickel-60d.gif (http://www.kitcometals.com/charts/nickel_historical_large.html#lmestocks_60days)

Interesting stuff, nickel now $6.85 a ilb OZ, Mincors cost is $6.00

Cawse Nickel who I worked for in Kalgoorlie on care and maintenance, other mines under review.

Demand destruction, is this the bottom :confused:

I wish I had a crystal ball and I asked it one question, what will the nickel price be in a year :confused:

[stevo1]

If you find your crystal ball let us know Tricha,I note that scrap 304 series in usa has fallen to 30c/lb amid a trade and vacuum demand.There is speculation PON may fall to $3/lb and scrap falling to zero. http://www.platts.com/Metals/News/8106953.xml?src=Metalsrssheadlines1

Not a good outlook if these people are right .I no longer hold any NI stocks but still watching waiting some time in the future will come right.

[macduffy]

For what it's worth, PAN noted in their recent Annual Report that they have sold forward an estimated 23% of nickel production to June, 2010 at USD11-50 per lb.
Should give them a bit of a buffer.

Disc: Hold a few PAN.

[Zephyrus]

If you find your crystal ball let us know Tricha,I note that scrap 304 series in usa has fallen to 30c/lb amid a trade and vacuum demand.There is speculation PON may fall to $3/lb and scrap falling to zero. http://www.platts.com/Metals/News/8106953.xml?src=Metalsrssheadlines1.Not a good outlook if these people are right .I no longer hold any NI stocks but still watching waiting some time in the future will come right.

Note that the article also states there should be a big bounce in nickel price when production gets cut.. That'll be good for the likes of IGO & WSA, who can ride through the low nickel price.. Not sure about MCR. They may have to cut back production too. Heaps of cash in the bank though.

[macduffy]

Note that the article also states there should be a big bounce in nickel price when production gets cut.. That'll be good for the likes of IGO & WSA, who can ride through the low nickel price.. Not sure about MCR. They may have to cut back production too. Heaps of cash in the bank though.

I think from memory that MCR have an estimated 11% of production hedged through to May, 2010. They also made some comment in the Annual Report to the effect that they would be concentrating production on the more efficient, better margin mines.

Disc: Hold a few of these, too. :o

[Huang Chung]

Western Areas at a price starting with a '2' would be a beautiful long term buy :).

[stevo1]

Undoubtedly PON will rise at some stage but if it does go to $3/lb(US) any of the nickel producer's SP will not be pointing upwards during that time IMO because of the sqeeze on their margins and unknown bottom.Those with cash certainly have a buffer but if they are paying to mine that buffer will run out pretty quickly on production of say 17000T before they go into loss.AU$ value compared to US will have a huge bearing as well (anyone know which way thats going to go?).Judging the turnaround entry price could produce some spectacular results sometime in the future .

[tricha]

If you find your crystal ball let us know Tricha,I note that scrap 304 series in usa has fallen to 30c/lb amid a trade and vacuum demand.There is speculation PON may fall to $3/lb and scrap falling to zero. http://www.platts.com/Metals/News/8106953.xml?src=Metalsrssheadlines1.Not a good outlook if these people are right .I no longer hold any NI stocks but still watching waiting some time in the future will come right.

Wow Stevo1 - scary stuff, the way its going there will be few nickel operations left in Australia.
2100 jobs gone at the push of a pen, it will turn Hopetoun into a ghost town, it rattling down the pipe fast, expect Mincor to report a reasonable loss,( like PEM,) when u close mines, redundances and closing out mining contracts are not cheap.


NOT ENOUGH TO BOOST NICKEL PRICES
Vanselow conceded the company "got it wrong on Ravensthorpe," but analysts said it was doing the right thing to shut it down in face of weak nickel prices.
"Ravensthorpe was always going to be relatively high cost, and it has been a difficult operation from day one," said Tim Schroeders, a portfolio manager at Pengana Capital.
Besides some 2,100 jobs cuts in Australian nickel mining another 4,000 jobs out of BHP's 101,000-strong global workforce will go, Vanselow said.
Vanselow estimated the total job cuts will cost $500 million.
With industrial activity worldwide slowing, analysts doubted the cuts to nickel output would be enough to turn prices around.
"The decision to suspend Ravensthorpe really reflects the weakness in the nickel market, which is probably one of the weakest in all commodities," said Gerard Burg, commodities analyst at National Australia Bank.
"I don't think the cuts will be enough to bring a rebound in nickel prices."
Nickel, a key ingredient in stainless steel, has seen its prices plunge about 80 percent to $11,200 a ton from $51,650 in May 2007.

[tricha]

And this used to be my favourite subject, Nickel, " the devils metal", I worked at Cawse Nickel, 60 km north of Kalgoorlie, wow talk about a complex plant. They shut Cawse about 6 monthes ago.

I could have just as easily ended up here, lots of the guys and gals were going to Ravensthorpe from Cawse.
Imm, Minara must be on the endangered list.

Nickel mine destined to be a dud


28th January 2009, 15:00 WST
http://www.thewest.com.au/multimedia/WAN%20ONLINE/ADVERTS/House%20Ads/DoubleIsland-static.jpghttp://ad.au.doubleclick.net/ad/thewest_ysay/opinion_cont;tile=6;sz=300x600;ord=123456789? (http://ad.au.doubleclick.net/jump/thewest_ysay/opinion_cont;tile=6;sz=300x600;ord=123456789?)
There’s an understandable anger in Ravensthorpe over the way Australia’s biggest company BHP Billiton went about the closure of its $2 billion nickel mine less than a year after the project was commissioned.

Many people were persuaded to move their families to the remote coastal district 600km south of Perth. Many businesses were encouraged to invest millions of dollars to support the project and its workforce.

Local farmers sold up either to work in the mine or establish support businesses.

Now many of those people face ruin or dislocation and are demanding to know why circumstances have changed so dramatically for a project which appeared viable just four years ago when then Labor minister for State development Clive Brown signed a memorandum of understanding with the company to develop the mine.

At the start of this century when BHP was eyeing off the laterite nickel and cobalt project in Ravensthorpe to complement the Yabulu processing plant in Queensland it inherited in the merger with mining giant Billiton, nickel was selling on the world market for around $US6000 a tonne.

By the time Mr Brown signed the MOU with BHP to kick start the Ravensthorpe mine, the price had risen to about $US14,000 a tonne and in the boom years it hit a staggering $US52,000 a tonne.

Today the price is around $US11,300 a tonne and still considerably higher than in 2001.

But a lot has changed in eight years and down in Ravensthorpe angry locals are asking why suddenly the nickel price isn’t good enough when a lesser price was seen as good reason to invest a vast sum in the project just a few years ago.

“It’s not just the nickel prices,” Ravensthorpe shire president Brenda Tilbrook said this week. “The reason they’ve closed that mine is because the engineering and the processes were not working sufficiently from day one.

“When the go-ahead came for the mine, the nickel prices were about the same as they are now. They never expected them to go up to $US50,000.”

Which is no doubt true, but neither did anyone see the price of oil hitting $US160 a barrel or iron ore getting to more than $100 a tonne, coal prices trebling, steel prices more than doubling or truck drivers in mining towns picking up $160,000 a year.

In the unprecedented boom after the decision to build the mine and processing plant at Ravensthorpe, capital costs skyrocketed, meaning a project that was expected to cost under $1 billion ended up costing closer to $2 billion.

The decision to mine at Ravensthorpe has always puzzled industry insiders because laterite nickel, unlike the sulfur oxide nickel found in other parts of the State and mined at depth, requires a complex high pressure acid leach process to bring it to an intermediate nickel-cobalt concentrate which BHP Billiton then shipped to the refinery in Queensland.

Like other laterite projects at Cawse and even Murrin Murrin in the early days, the project struggled from the start and various reports have the company facing between $255 million and $800 million in extra capital costs to get it right.

“There was going to be a significant amount of capital required to achieve and sustain the known level of 100 per cent capacity at Ravensthorpe but we haven’t said what that was,” BHP spokeswoman Samantha Evans said.

“That was one of the reasons for the decision to suspend operations. Others were the outlook for the nickel market and the downturn in market conditions, particularly over the last quarter of last year.”

At 100 per cent capacity, the mine was expected to produce about 50,000 tonnes of nickel concentrate a year, but since last May it has only pumped out 14,000 tonnes.

“I don’t think Ravensthorpe has performed to specifications,” independent mining analyst Peter Strachan said yesterday.

“The mined grade was a bit lower than they anticipated and I don’t think it actually worked according to the manual when they started it up.

“It never got near full capacity and of course these things have to be run flat out to be commercial because of the high level of fixed costs.”

BHP will now mothball the mine and the houses it built for its workforce. Drive through Hopetoun in seven months when the mine is down to care and maintenance mode and there will be streets full of empty, brand new four-bedroom, two-bathroom homes, a mainly empty school and a never-used shopping centre.

Hopes of firing up the mine once nickel prices improve depend not only on the world economy recovering quickly from the worst economic slump in 80 years but BHP actually deciding to spend the big money to fix the plant.

At the height of the boom, the world’s nickel consumption was 1.4 million tonnes a year and the inventory on any day stood at close to zero. Nickel was being used as fast as it could be ripped out of the ground and shipped to China’s voracious steel mills.

Small miners who snapped up Western Mining’s nickel assets at the start of the boom made a killing but have also moved into care and maintenance mode.

“Four years ago, the nickel price was around $US6 a pound and at that level most of the world’s nickel producers were cash-flow positive,” Mr Strachan said.

“Now we’ve got close to the same price and we’ve got almost 50 per cent of the market actually losing money.”

Today the world’s nickel inventory stands at 82,000 tonnes and climbing and is predicted to go a lot higher before it starts to fall.

For Ravensthorpe, it’s going to be a long way back.
ROBERT TAYLOR
INSIDE STATE

[paul29]

RUSSIA'S Norilsk Nickel will suspend the two remaining mines in its Australian nickel operations because low prices have made the operations unsustainable.

Norilsk will suspend the Black Swan and Lake Johnston mines immediately, cutting staff by about 330 from March 1 to leave a small number of employees to carry out care and maintenance at the sites.

Last year, the two mines produced about 25,000 tonnes of nickel concentrate.

Norilsk owns a number of mines in Western Australia, producing almost 30,000 tonnes annually.

Norilsk bought US-based OM Group's nickel business for $US408 million in 2007 as well as taking over Australia's third-largest nickel miner, LionOre Mining International, for $US6.36 billion when nickel was bringing record prices.

In November, the world's biggest nickel miner shut its Cawse and Waterloo operations because of the metal price slump.

Australian nickel miner Western Areas said yesterday it had restructured its ore offtake deal with Norilsk, relying instead on its own concentrator, which is in the start-up phase. Nickel is mainly used to make stainless steel, and global steel prices fell by about 40 per cent during the course of last year.

After hitting record highs of more than $US50,000 a tonne in mid-2007, nickel plunged to a five-year low of $US8850 a tonne in October, forcing many operations to shut down.

Earlier this year, BHP Billiton announced it would shut its 50,000 tonne Ravensthorpe nickel laterite operation.

It took an impairment charge of $US3.36 billion from the project, which it commissioned last year.

[tricha]

Interesting picture, something strange is happening with the stock levels, which generally trend up at this time of the year.:confused:




http://www.kitconet.com/charts/metals/base/lme-warehouse-nickel-5y.gif (http://www.kitcometals.com/charts/nickel_historical_large.html#lmestocks_5years)



http://www.kitconet.com/charts/metals/base/lme-warehouse-nickel-60d.gif (http://www.kitcometals.com/charts/nickel_historical_large.html#lmestocks_60days)

[tricha]

RUSSIA'S Norilsk Nickel will suspend the two remaining mines in its Australian nickel operations because low prices have made the operations unsustainable.

Norilsk will suspend the Black Swan and Lake Johnston mines immediately, cutting staff by about 330 from March 1 to leave a small number of employees to carry out care and maintenance at the sites.

Last year, the two mines produced about 25,000 tonnes of nickel concentrate.

Norilsk owns a number of mines in Western Australia, producing almost 30,000 tonnes annually.

Norilsk bought US-based OM Group's nickel business for $US408 million in 2007 as well as taking over Australia's third-largest nickel miner, LionOre Mining International, for $US6.36 billion when nickel was bringing record prices.

In November, the world's biggest nickel miner shut its Cawse and Waterloo operations because of the metal price slump.

Australian nickel miner Western Areas said yesterday it had restructured its ore offtake deal with Norilsk, relying instead on its own concentrator, which is in the start-up phase. Nickel is mainly used to make stainless steel, and global steel prices fell by about 40 per cent during the course of last year.

After hitting record highs of more than $US50,000 a tonne in mid-2007, nickel plunged to a five-year low of $US8850 a tonne in October, forcing many operations to shut down.

Earlier this year, BHP Billiton announced it would shut its 50,000 tonne Ravensthorpe nickel laterite operation.

It took an impairment charge of $US3.36 billion from the project, which it commissioned last year.

I maintain that something odd is happening with the Nickel LME stocks.

It could mean a shortage of nickel, is coming again. Most producers are suffering with the high Aussie $ and lower nickel price.
Lake Johnston is starting up again, talk is Australian nickel miner Western Areas, will use Norilsk plant Lake Johnson to concentrate their overflow ore.
Hmm, perfect marriage, Western Ares is dirt cheap, so do not be surprised if Norisk mount a take over very soon.

Happy hunting folks.

http://www.kitconet.com/charts/metals/base/lme-warehouse-nickel-6m.gif (http://www.kitcometals.com/charts/nickel_historical_large.html#lmestocks_6months)

[tricha]

[QUOTE=tricha;356474]Interesting picture, something strange is happening with the stock levels, which generally trend up at this time of the year.:confused:

The picture is broke, but the stock levels are still dropping, when historically at this time of the year they should be rising.

I have not a clue what is going on, I can only guess is, that at this price nickel mines, are unprofitable and are reducing output.
IGO, PAN and MCR will strugglle at the current nickel price, WSA will reveal all in a week.

If there is another nickel shortage, all these companies will rebound. WSA will be printing money.







[/URL]



[URL="http://www.kitcometals.com/charts/nickel_historical_large.html#lmestocks_60days"] (http://www.kitcometals.com/charts/nickel_historical_large.html#lmestocks_5years)

[gazprom1]

Hi Tricha,

Who knows when the nickel price will rebound but IMO PAN will perofrm ok. They are 34% hedged for FY2012 according to their numbers. Also, their cash costs per pound is relatively low and can still make money at these levels. Maybe a good opportunity for them to scoop up an under pressure producer as have cash in the bank.

Gazprom

[JBmurc]

Buying a few shares in WMG ....have they discovered the next "Mt Kieth" Nickel monster deposit ???? early days but some great signs

https://thewest.com.au/business/public-companies/western-mines-steps-closer-to-elusive-nickel-source-c-10372105

[Sideshow Bob]

Great thread dredge......almost 12 years between drinks!! :mellow:

[JBmurc]

Yep ASX has a huge amount of stocks /resources/sectors and so few ST members in the ASX markets.(dead opposite to you NZX ). couldn't be assed starting another thread for Nickel ...