Nickel prices have soared over the past three years from levels a decade ago that made the most optimistic nickel miner question their chosen field.
Nickel prices have soared over the past three years from levels a decade ago that made the most optimistic nickel miner question their chosen field.
While producers have become very rich in the expansion, everyone is wondering how long it will last.
Despite this uncertainty, commodity experts are predicting inflated prices will hold up longer than expected, and so will the miners’ smiles.
In 1998 nickel was being sold on the London Metal Exchange for a miserly $US5,000 a tonne.
In seven years its nominal value has more than tripled because of demand from the hungry Chinese economy. Analysts see the buoyancy continuing for at least the next two years.
This confidence is expected to fuel more development in Western Australia’s already booming nickel mining industry, with juniors expected to benefit if they move fast.
The medium-term future of the commodity seems secure as analysts are up-beat about the commodity.
Hartleys’ Jon Battershill is forecasting the price will level out in late 2006 or early 2007 at around $US12,000 to $US13,000 a tonne.
Mincor managing director David Moore said: “I think you can expect to see more consolidation [from the industry] in the future”.
“Demand is strong in China and the 27-month forward price is currently $US12,000 per tonne,” he said.
His sentiment is shared by the major producers explaining the flurry of recent acquisitions.
In the meantime, for mid-caps planning to develop exploration tenements into producing mines, market timing is a key consideration.
Patersons analyst Alex Passmore said he believed the deciding factor for the mid-caps would be the lead time surrounding development of various projects because of price expectations.
“If [the lead-time] is around three years, then yes the mid-cap sector should keep developing mines,” he said.
And there is certainly nothing in the capital market holding them back.
Mr Passmore points to the financial markets’ appetite for nickel stocks at the moment as a driver for growth.
“Since the nickel price doubled, people are prepared to pay for expensive assets with leverage from the market,” he said.
