BMO Capital Markets has increased its mid-term nickel price assumptions by 26% to US$5.80/lb and 36% for 2010 to US$7.50/lb.
In analysis published Thursday, BMO Research upgraded the outlook for nickel for the second half of this year, 2010, 2011 and 2012. The long-term price forecast of US$8.50/lb has been maintained.
The improved outlook is partially attributed to "much improved sentiment toward base metals in general and pending improvements in demand conditions."
"Additional factors include signs of an economic bottom in the U.S., the fact that the Chinese economy is showing the capacity to absorb large nickel imports (suggesting some restocking) and aggressive production cuts," said BMO analysts David Cotterell, Bark Melek, David Radclyffe, and Tony Robson.
The analysts noted that LME nickel prices have jumped 25% since late December to $6.60/lb. "The general improvement in sentiment was a factor, through strong Chinese buying, an improving U.S. economic outlook and movements in the stainless steel market are the underlying reasons."
Meanwhile inventories of manufactured goods globally are declining, manufacturing in China turned positive and new manufacturing orders and housing are looking hopeful in the U.S. "This should mean that stainless steel production and nickel demand be re-energized, potentially unwinding material amounts of LME inventories quickly," the analysts forecast.
In BMO's analysis, it was noted Chinese stainless steel product "has perked up recently with reported utilization rates of 90% at larger mills. Whether or not this is sustainable is an open question, as the Chinese government is said to be rationalizing production and taking steps to cut overcapacity."
"These actions are expected to moderate in the coming months," the analysts advised.
Meanwhile, western world producers are expected to enter their own restocking phase, "which will support the relatively weak underlying nickel demand and aid prices," they added. "Combined with a recovering economic environment, the corollary to the severity of the nickel price correction and this market's relative liquidity suggest that prices may rebound quickly."
Mineweb is a web-based international mining publication focusing on mining financial and corporate news and comment.
Selected Nickel focused companies.
Amur Minerals (AIM: AMC) is a mineral resource company developing metals deposits in Russia. The company's flagship asset is the Kun-Manie Nickel sulphide project in the far east of Russia.
European Nickel (AIM: ENK) is an emerging mid-tier nickel laterite producer with a simple, low cost heap leach process which offers a competitive edge over conventional nickel laterite HPAL processing. The Company’s assets span Turkey, the Philippines and Albania, with an identified pipeline of growth targeting 70,000tpa of nickel production.The Caldag project in Turkey is the Company's flagship asset for which has just been given the green light for development, following approval of a forestry permit approval and a signed a financing framework agreement with Chinese partners for a guaranteed US$350 million debt facility.
Horizonte Minerals (AIM: HZM) is focused on the discovery, appraisal and development of gold and base metal deposits in Brazil and Peru. One of the company's key assets is the Lontra Nickel Project in Brazil.
Landore Resources (AIM: LND) principal properties are the “Junior Lake Property” and the “Miminiska Lake Property”, both located in the Thunder Bay Mining District, Ontario, Canada.
Lithic Metals (AIM: LMY) is exploring for nickel deposits principally in Zambia and other southern African countries.
Mirabela Nickel (ASX:MBN) is engaged in mineral exploration and development in Brazil. The principal activity is the development of the Santa Rita nickel sulphide project. The Company’s other projects include Serra Azul nickel saprolite resource, Palestina nickel sulfide exploration and Sao Francisco nickel sulfide exploration.
Poseidon Nickel (ASX:POS) main activities are towards the exploration and development of nickel mineralisation in Mt Windarra 260km NNE of Kalgoorlie.
Regency Mines (AIM: RGM) is focused on exploring areas of copper and nickel potential in Western Australia, Queensland, and Papua New Guinea (PNG). In 2006 the company acquired 75% of the Mambare Plateau lateritic nickel project PNG.
Rusina Mining's (AIM | ASX:RML: RMLA) main asset is the Acoje nickel laterite property which also hosts chromite, nickel sulphides and platinum group metals.
Talvivaara Mining (LSE: TALV) primary activity is the development and commercial exploitation of two polymetallic deposits, Kuusilampi and Kolmisoppi, in Sotkamo, Eastern Finland.
Toledo Mining (AIM: TMC) is a mining company focused on nickel exploration and development in the Philippines. It has significant interests in three nickel laterite projects (Berong, Celestial and Ulugan) on Palawan in the Philippines.
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