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Nickel Price Forecast 2016

What's the nickel price forecast for 2016? Here Raymond Goldie of Salman Partners weighs in.

A year ago, nickel market watchers were hoping to see a deficit in the second quarter of the year. At the very worst, analysts were calling for balance in the space after years of turmoil.

However, as those who’ve kept up with nickel-related developments are no doubt aware, neither of those positive predictions came true. In fact, quite the opposite happened — as the below chart from Kitco shows, the nickel price crept steadily downward throughout 2015, ending the year just below $4 per pound.

Putting that into perspective, Bloomberg states that as of midway through December, the nickel price had fallen more than 40 percent since the start of the year. Meanwhile, The Sudbury Star recently described nickel as “the worst performing main contract on the London Metal Exchange,” noting that the metal reached its lowest price since June 2003 in November.

Nickel spot price, January 2015 to December 2015. Image courtesy of Kitco.

To find out what went wrong for the nickel price in 2015, and to learn what’s in store for the base metal in 2016, the Investing News Network reached out to Salman Partners’ Raymond Goldie. Here’s what Goldie, also a director at Equitas Resources (TSXV:EQT), had to say.

2015 nickel themes

Nickel’s 2015 price troubles can largely be summed up in one word: China.

According to Bloomberg, the Asian nation is facing its “weakest growth in a generation,” an issue that’s reduced demand for many products. However, nickel has been particularly hard hit because China consumes about half of the world’s nickel.

Explaining the situation in more detail, Goldie said that while end-use demand for nickel did grow in 2015 by about 3 to 4 percent, “to a degree that neither [he] nor the market expected, much of this demand was satisfied by running down stockpiles of finished nickel, both in China and the US, that were larger than had been realized.”

In other words, the deficit that was expected by some did not happen because there was more finished nickel available than anticipated.

Goldie also pointed out that China’s continued production of nickel pig iron — a low-grade ferronickel used in stainless steel production as a cheaper alternative to finished nickel — didn’t help matters.

“Like the dog that did not bark in the night, the big news [in the nickel space in 2015] was what did not happen: China apparently did not cut its production of pig nickel to a rate below 300,000 tonnes of contained nickel per annum,” he said.

Originally, Goldie had expected depleting Chinese inventories of high-grade nickel laterite ore (used to make nickel pig iron) “to force, around the end of October, sharp cutbacks in China’s production of pig nickel.”

2016 nickel price forecast

2015 might have been a bad year for nickel, but luckily many involved in the space are hopeful about its prospects in 2016.

Goldie is one such optimist. He believes that a “surge in China’s net imports of finished nickel in September and October” indicates that the country’s finished nickel inventories “are probably down to normal working levels now.” Furthermore, he sees a number of other factors positively impacting the nickel market in 2016, namely:

• US inventories of finished nickel should get back down to “normal levels” during the first quarter of 2016
• Chinese inventories of feedstock for nickel pig iron smelters should be “largely gone around the same time”
• End-use demand from both China and the western world should continue to grow by 3 to 4 percent per annum

All in all, he “expect[s] a bull market in nickel that could last several years.”