Nickel, nickel, nickel. It’s the metal on everyone’s lips. Or at least, it is for the metal traders out there.
It surged in price earlier this month on the back of the booming electric car market. Making some exceptional gains in just a few days.
Except everyone got ahead of themselves.
And so the start of a very sweet November has finally turned sour. What goes up must come down as they say.
Nickel’s price plummeted overnight to US$11,575 per tonne, dipping 5.5%. Capping off an already poor performance earlier this week, the metal has plunged 9.1% since Monday.
As Bloomberg reports:
‘“Nickel has been on a rollercoaster, it was the hot topic during LME Week but
I think deep down everyone was uneasy about whether the rally was
sustainable,” one trader said.
‘“It wasn’t supported so high, and therefore the price correction is not a
surprise, maybe just a bit harsh,” he added.
‘The price rise was certainly driven on the continuous talk of EVs affecting
the metals industry soon, but there was some dispute among participants about
when this would truly affect nickel’s fundamentals.’
With the correction now priced into the markets, Nickel has returned to levels seen at the end of October. Perhaps the first half of November is better left as an anomaly. A sign of where Nickel will be when EV (electric vehicle) demand really hits.
For now though, Nickel bulls will have to eat some rather sour, humble pie.
Meanwhile, other markets didn’t fare much better:
Copper price — US$6,715 per tonne: -1.56%
Zinc price — US$3,190 per tonne: – 1.02%
Aluminium price — US$2,081.5 per tonne: -0.14%
Iron Ore price — US$61.95 per tonne: +0.7%
Copper falls but outlooks remains upbeat
Despite joining nickel prices in a rather sharp slide overnight, copper enthusiasts remain optimistic. It’s been one of the better performers this year, and despite the recent slump, long-term copper bulls are sticking to their guns.
Bloomberg Intelligence analyst, Andrew Cosgrove, believes the copper rally that started in 2016 still has some legs left to stand on. He outlines several reasons for his view, which include:
- ‘Mine-supply growth is expected to average 2.0% over the next
five years, but estimates in years 2021-2022 could come in below
expectations if a handful of large projects (most awaiting
approval) do not come to fruition’.
- ‘If copper prices don’t stay near current levels over the next
few years, the market risks tipping into a deeper deficit as
early as 2020, with bigger effects being felt in 2021-2022’.
- ‘Part of Bloomberg Intelligence’s bullish base-case outlook
rests on the assumption that the supply of secondary refined
production, which uses copper scrap, will not repeat 2017’s
estimated growth of 7%-8%; forecasts global copper scrap supply
growth will be just 1% per year’.
Just like Nickel, the long-term outlook is looking positive for Copper. Except rather than growing demand, it’s a shortfall in supply that could trigger the upswing.
It’s also important to note that Chinese traders are also influencing the price. The London Metals Exchange (LME) still remains the benchmark for metals pricing, but the Shanghai Futures Exchange is starting to play a bigger role. Pricing on the LME is already feeling the effects from Shanghai.
As CNBC reports, the market is hot:
‘Asia metals trading is growing so rapidly for CME, the world’s largest futures exchange, that it is planning to launch on Nov. 20 a futures contract settled against spot copper prices in Shanghai. CME said its contract will be the first financial settled exchange-traded futures product for hedging exposure to Chinese copper.’
This shift to a Chinese focused metals market could produce some minor hiccups for copper’s long-term outlook. However it will almost certainly reflect the market more accurately, which is always a good thing.
Zinc price slides after China’s October sell-off
Chinese zinc refineries reportedly worked overtime last month. Output hit record highs and smelters were operating close to full capacity. As Bloomberg reports:
‘Zinc production reached 577,000 tonnes in October, compared to 537,000 tonnes
a month ago, the National Bureau of Statistics said on Thursday November 16.
‘This surpasses the high level of output produced in November 2014 when the
monthly output stood at 562,000 tonnes.’
The reason? To cash in on the soaring zinc prices.
Aluminium buoyed by China fears
Again, China’s crackdown on polluters has come into play. This time aluminium’s losses were minimal, due to fears that supply may be affected. Which comes after aluminium’s price hit a five year high in October over similar fears.
Though one producer is apparently looking to move some of its operations overseas to avoid restrictions. At least according to a source that spoke to Reuters. Which if true, would contribute to oversupply in the long-term, as one analyst notes.
Iron ore price steady with BHP eyeing strong long-term demand
Iron ore prices have again remained fairly stagnant in trade. But that’s no concern for Andrew Mackenzie, CEO of BHP Billiton Ltd [ASX:BHP]. He believes China and India will require plenty of high quality iron ore long-term.
‘…our long-term view for markets remains positive…
‘New demand centres will emerge where the key levers of industrialisation and urbanisation are still immature, such as India…’
He believes this leaves BHP in a great position long-term. The Aussie miners still have cause for celebration, or at least they will if all these long-term forecasts come true…
In the meantime why not check out our top 10 mining stocks. We think we’ve found some of the most promising miners for the rest of 2017 as well as 2018. Read all about it right here.
Junior Analyst, Markets & Money