25-year nickel bull cycle

DEUTSCHE Bank has outlined the reasons nickel is heading for a “massive” supply deficit in the next three years.

  • Staff Reporter
  • 23 November 2018
  • 05:03
  • News
25-year nickel bull cycle

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Earlier this month, the bank declared 2018 as the start of a 25-year nickel bull cycle, based on a study of historical nickel prices dating back 37 years.
 
"The price has been traded below 90th percentile of cash cost curve since 2012/2013," analysts noted.
 
"By 2018, after a five-year drought, the price finally traded above the 90th percentile cash cost curve. The last time the price suffered a similar trend was between 1982 to 1987 after workers of Canadian miner Inco ended a massive labour strike and brought surplus of supply, forcing many marginal players to shut down."
 
Based on its research, Deutsche Bank says we are now in the first year of a bull cycle, with the apparent shortage of high grade nickel products (class 1) while strong demand from lithium-ion batteries to be a strong catalyst for many years.
 
It expects demand for batteries to outstrip stainless steel by 2025.
 
"History will likely repeat itself for another 25-year of nickel bull cycle," it said.
 
Deutsche says there are clear signals for a rally, though rapid drawdown of stocks so far this year impacting prices due to the trade war between China and the US.
 
After rising stocks and surpluses between 2011 and 2015, that trend had reversed and Deutsche forecasts "massive" deficits between 2018 and 2020, including 209,500 tonnes this year alone.
 
The bank added that positioning in nickel ETFs was rising, while the share of class 1 nickel producers was falling.
 
Deutsche expects the nickel price to average $18,000 per tonne next year - around 63% higher than current levels.
 
The price has averaged $13,187.17/t so far in 2018, peaking at $15,687.50/t in early June.
 
Overnight, the gold price was fixed at $1228.71 per ounce.
 
The WTI crude oil price was slightly down overnight at $53.85 per barrel.
 
In softer commodities, cocoa decreased $60 per tonne or 2.80% to $2084/t yesterday from the $2144 in the previous trading session, tradingeconomics.com reported. Historically, cocoa reached an all-time high of $4361.58/t in July of 1977 and a record low of $211/t in July of 1965.
 
Coffee decreased 0.35c per pound or 0.32% to 110.30c/lb yesterday from 110.65c/lb in the previous trading session, tradingeconomics.com reported. Historically, coffee reached an all-time high of 339.86c/lb in April of 1977 and a record low of 42.50c/lb in October of 2001.

 

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