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January 29, 2007
Nickel Looks Unstoppable
Nickel broke though the US$40,000 a tonne level last week to achieve a new high on a cash price of US$41,300 on Thursday. Prices slipped a bit on Friday but still closed over that threshold. The widely quoted three month price achieved US$38,000/ tonne and is a measure of how much of a premium there is for spot delivery. The proximate cause of the price spike remains the labour dispute at the Sudbury nickel mine in Canada owned by Xstrata that produces 65,000 tonnes of contained nickel a year, equivalent to about 4 per cent of world output. At the moment there appears little sign of resolution so consumers will be taking whatever action they can to secure metal.
Nickel itself is a small component of stainless steel and raw materials only constitute a small part of the overall cost of a manufactured product these days so fabricators have every incentive to pay up and keep production rolling. Where that will take nickel prices is anyone’s guess. That said, it is instructive to look at the 15 month forward price of US$29,975 a tonne to see what the market thinks the price will be next year. Any producer that can lock in today’s premium must be...
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