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Sep 22, 2016


Industry News

Glencore bullish on nickel

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Mining 2016


METALS giant Glencore believes the nickel market is already in deficit and tips a bright future due to the onset of the electric vehicle “revolution

The Swiss major had long been critical of oversupply in the nickel sector which had sent the price to a 13-year low earlier this year, but said the medium to long-term outlook was much

The company noted that consumption had been significantly stronger this year, due to higher stainless steel production, increased demand from the battery market and tightness in the scrap market.

Glencore believes nickel demand is up by 10% in 2016 over last year.

According to Glencore’s estimates, $US4-5 billion has been invested in downstream nickel processing capacity in Indonesia since its export ban in 2013, deeming it an “unmitigated success”.

Ore supply from the Philippines is down, constraining Chinese nickel pig iron production.

It is speculated the Philippines government will order the closure of another 12 mines today, mostly nickel producers, over environmental concerns.

There have also been production shutdowns by Panoramic Resources, Queensland Nickel, Mincor Resources and Mirabela Nickel, among others.

Despite long calling for supply discipline, nickel is one area where Glencore has not cut production.

It owns the Murrin Murrin mine in Western Australia and the Koniambo mine in New Caledonia, but has acknowledged that both have struggled at lower prices.

Glencore estimates first half global nickel supply was down by 3% year-on-year, and will be down by 4% for the year to 1.9 million tonnes.

“Following years of structural oversupply, the market today is already much-improved,” Glencore said.

The company estimates the nickel market returned to balance in the December quarter of last year and moved into deficit in the June quarter.

For 2016, it forecasts deficits of around 100,000 tonnes of nickel.

But it warned the “structural oversupply” seen in recent years and subsequent high inventories had slowed the recovery.

“Further supply rationalisation and continued demand growth will help drive a significant and sustained recovery in prices,” it said.

The company also has a positive long-term outlook for nickel, due to its use in lithium-ion batteries.

“Whilst the materiality is debated, we believe plue-60,000 tonnes of nickel demand in batteries today will multiply over the next five years to 150,000-300,000t and potentially more,” Glencore said.

“The medium-term/long-term outlook is much more positive fundamentally and we believe it is only a matter of time before the markets start to recognise this and price accordingly.”

The nickel price is up around 17% so far this year and has traded in a wide range of $7561-10,815/t. it last sat at $10,301/