Nickel price expected to rise: Economist – by Carol Mulligan (Sudbury Star – June 26, 2015)

The Sudbury Star is the City of Greater Sudbury’s daily newspaper.

The low nickel prices that prompted First Nickel Inc. to halt underground ramp development and consider shuttering its Lockerby Mine are expected to increase, but not dramatically, by the end of the year, says an economist.

Nickel was selling for US $5.80 on the London Metal Exchange earlier this week, and Patricia Mohr is forecasting it could rise to a profitable $8.75 in 2016.

Mohr is vice-president of economics and commodity market specialist at Scotiabank. The below-$6 price of nickel isn’t a profitable level, although it might cover cash costs or production at Canadian mines because we have “fairly low-cost nickel mines in Canada,” said Mohr.

“But it’s not sufficient to cover full break-even costs including depreciation and so, it’s a low price for nickel.”

FNI president and chief executive officer Thomas Boehlert blamed the decisions his company was forced to make on nickel selling below $6 a pound.

Mohr said observers were hoping nickel prices would respond favourably to a ban imposed by Indonesia on the export of all unprocessed nickel-containing ores.

China has been buying ore containing nickel from Indonesia and making it into nickel pig iron in China, a form of processed nickel used to charge stainless steel mills to make stainless steel, said Mohr.

Before the ban, Indonesia accounted for 34% of world nickel supplies, she said.

While its export of nickel-containing ores has reduced dramatically, it has been partly offset by increased production of similar, but lower quality ore from the Philippines, said Mohr.

What also hurt the nickel price was a decision by the European Commission a couple of months ago to impose anti-dumping duties on Chinese stainless steel producers.

China has been able to continue nickel pig iron production without Indonesian ore because it had an inventory on hand from that country in previous years and because of imports from the Philippines.

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