Nickel's current prices may be a far cry from the series of rallies it recorded last year, but Andrew Cole stated that it remains the favourite in the base metal segment.
Cole, principal analyst at Metal Bulletin Research in London, believes that analysts and followers of base metals would still pick nickel over palladium, zinc, and titanium. What's happening to nickel, he suggested, is a mere repetition of 2014 when nickel came from nowhere before the record-breaking rallies.
In 2014, nickel was seen hiking in prices continuously on news that the embargo imposed by Indonesia reached a 'point of no return.' The London Metal Exchange (LME) recorded a three-month price racing up from below $15,000 per tonne to a May high of $21,625.
The ban caused a deeper problem on the supply sector, as China's NPI production lost its vigor after losing its main source. Also, steel companies from Japan had to look for alternatives since a large percentage of its nickel was from Indonesia.
Nickel prices continue to swell on news that some Russian companies could be banned from the global market due to their involvement in the Crimean crisis. Speculations included Norilsk Nickel, Russia's largest base metal supplier.
While the supply sector grieved, the investors celebrated. Nickel prices continued to soar when economists predicted a possible supply deficit in 2015. At the time, which is still the case today, consumers were depending heavily on lower-grade ores from Russia, Australia, New Caledonia, and, especially, the Philippines.
Other sectors that thrived amid nickel's bullish prices include small-scale nickel mining firms. The precarious supply-and-demand segment tickled the imagination of speculators and began looking for potential suppliers in the future. Companies like Amur Minerals Corporation (OTC:AMMCF), Asian Mineral Resources (CVE:ASN), and Sirius Resources (SIR:ASE), are all focusing on promising nickel reserves. Their respective projects' sizes and nickel deposits could help improve the ailing supply segment.
However, despite the ongoing ban and decreasing stockpiled supply in China, nickel experienced significant drops in January. Several analysts expressed their doubts over the base metal's future, if it's still capable of emulating its 2014 performance.
For Cole, this is no impossible scenario.
He is certain that there are many entities that could bring nickel back to its old shape. He reiterates that as long as the laterite ore embargo in Indonesia continues, nickel's prices will remain stable.
Prices would most likely swell if the Philippines failed to supply China and Japan the ore they needed, especially if it happened in the second quarter. In other words, so long as the nickel industry remains uncertain, its prices remain palatable to investors.
In Coles words: "Good things, they say, come to those that wait." Hence, investors just have to wait, just like how they did in 2014.