CHAPTER 6 MINERAL COMMODITY MARKETING AND PRICE MODELING

6.1 Forecast Nickel Price

Nickel is an essential element of modern manufacturing industries and is critical

for industrial nations and modern societies. Nickel is a desirable input for a wide variety

of capital-intensive goods as well as high-performance products due to its valuable

characteristics such as strength, toughness and heat resistance as well as magnetic

and anticorrosion-giving properties. Approximately two-thirds of globally used nickel is

used in (stainless) steel production in addition to certain specialized applications. It

would be impossible to produce without the corrosion-resistant properties of various

critical forms of stainless steel, ranging from ordinary V2Asteel1 to high-performance

superalloys. Over the last century, the value of nickel has grown considerably. Over the

past 150 years, still the actual nickel prices have been highly volatile.

There are essentially two types of ore that can be economically exploited in

nickel production: sulphide and laterite ores. In essentially dissimilar environments, both

types of deposits exist and vary in their geological properties. Furthermore, each type of

ore requires different methods of production, processing and refining. Most of the

world's nickel reserves are in laterite ores, but sulphide ores have traditionally

dominated the production. Even though production as well as consumption showed a

distinct upward trend through the past 150 years, real nickel prices experienced

considerable fluctuations and ambiguous movements and did not show any particular

trend on first sight. The biggest producers of nickel are Philippines, Russia, Canada,
New Caledonia, Australia, Indonesia, Brazil, Cuba and Colombia. Nickel futures are

available for trading in The London Metal Exchange (LME). The standard contact has a

weight of 6 tonnes.

Nickel increased from the start of 2019 by 6.498.50 USD / MT or 61.28 percent,

according to trading on a differential contract (CFD) which tracks the benchmark

demand for this product. Historically, in May 2007 Nickel hit an all-time high of 54050

and in December 1998 a record low of 3730.50.

6.2 Economic Parameter

Figure 11. Nickel Forecast 2019

Nickel is expected to trade at 16986.53 USD/MT by the end of this quarter,

according to Trading Economics global macro models and analysts expectations.

Looking forward, we estimate it to trade at 15972.23 in 12 months’ time. The world bank

in its commodity forecast report estimated that the average spot price for nickel will

grow slightly further in 2018 to 10, 559 US dollars per metric ton from 10, 100 US
dollars in 2017. Over the next decade, the price will grow to 18,000 US dollars per

metric ton.

6.2 Economic Parameter

The economy consists of two sectors, one of which produces commodities

subject to exogenous fluctuations in international prices. Such fluctuations influence

both the economy's productivity and terms of lending, as higher commodity prices are

associated with lower spreads between the borrowing rate of the country and world

interest rates. Both effects result in strongly positive effects on GDP, consumption, and

investment from commodity price increases, and a negative effect on the overall

balance of trade. The price of nickel is primarily determined by the ability of copper

suppliers to extract and transport the product, as well as the demand for goods and

services that require nickel. Other broad factors include interest rates, economic growth,

the availability and attractiveness of substitute goods, and political considerations.

The Philippines which is the world’s second biggest supplier, next to Indonesia,

of the metal that is used to make stainless steel and which is estimated to account for a

fifth of global mined nickel supply saw declining nickel mine production over the past

few years, with volume falling to 340,000 tons last year from 554,000 tons in 2015. Like

most industrial or agricultural commodities, traders should be aware of a large number

of macroeconomic factors that influence nickel price movements, which include the

price of alternative base metals such as aluminum, copper, lead and iron. Systematic

variables, such as the weather or time of the year, can affect nickel production, demand
or transportation. The prices of individual metals, like prices for any commodity, are

essentially determined by supply and demand.

Producers, Consumers and Governments Stocks of Nickel. Most of this disposal

took place at times of shortages of nickel supplies and hence contributed to price

stability. Other parts of those disposals went into producers' and consumers' stocks. But

these inventory accumulations did not seem to be excessive, since the rising level of

consumption necessitated additional stocks of nickel. Furthermore, the rising price of

nickel and the fear of nickel shortages in the future made inventory accumulation an

attractive investment. In the immediate future the stocks of nickel could increase as a

result of high prices and the current world recession. On the other hand, high interest

rates and a stagnating world economy imply that efforts will be made to reduce

inventories of nickel. Since the demand for nickel is not likely to pick up fast, there will

be production cutbacks in the near future and/or prices will be stable or even slightly

falling for the next years.

Global Stocks. Current prices do not only factor in immediate supply and demand

but also expectations of future supply and demand. In general, the less information

available, the greater price volatility will be. Price determination mechanisms range from

an advanced spot and forward contracts traded online as well as in London at the

London Metal Exchange (LME) or in New York at the New York Mercantile Commodity

Exchange (COMEX) to basic cash exchanges between buyers and sellers. The London

Metals Exchange (LME) keeps track of global stock levels for nickel and other industrial

metals. Traders follow these inventory levels closely for clues about supply shortages or

surpluses. If inventory levels drop, the market may be facing a shortage of nickel supply
in the near future. This could lead to higher prices for the metal. Similarly, if stockpiling

occurs and inventory levels expand, then the market might face an oversupply of the

metal, which can lead to lower prices.

https://tradingeconomics.com/commodity/nickel

http://www.hwwi.org/fileadmin/hwwi/Publikationen/Publikationen_PDFs_2018/HWWI_R

esearchPaper_186.pdf

https://knoema.com/ydolvrc/nickel-prices-forecast-long-term-2018-to-2030-data-and-

charts

https://www.sciencedirect.com/science/article/pii/S0022199617301630

https://www.econstor.eu/bitstream/10419/52654/1/673097064.pdf

https://pubs.usgs.gov/of/2008/1356/pdf/ofr2008-1356.pdf

https://commodity.com/precious-metals/nickel/