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How to profit from higher Nickel prices...?

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August 13, 2010 – Comments (9) | RELATED TICKERS: OMG , ATI , USAP

It looks like Nicke prices are headed higher.

Here is an article about it from PF Online (Products Finishing, www.pfonline.com) by Tim Pennigton. Feel free to add your thoughts and ideas on how to profit from raising Nickel prices.

(p.s. I'm sure you'll love the government reference toward the end of the article):

Nickel and dimed just got more expensive

Don’t look now, but those who dabble in nickel may be getting hit hard soon by additional price increases if – as expected – the Chinese market has a surge in demand for the metal. Reports say that China (which accounts for 30% of worldwide usage) may soon see an 18.6% leap in demand, or roughly 510,000 tons.

Talk about price spike!

Analysts at Desjardins Securities say they expect nickel to rise to $9 a pound this year, and $10 a pound in 2011. The demand problem has been augmented by ongoing strikes at Vale Inco’s plants in Canada, unacceptable nickel laterite, as well as an increased production in stainless steel, Desjardins told clients.

They say the nickel supply has been further exasperated by a lack of quality in nickel laterite ore, which is primarily imported to China for use in nickel pig iron by stainless-steel mills.

“According to the CRU, much of the material imported in 2009 had an unsuitable nickel/iron composition,” says Desjardins. “CRU estimates that of the 9.3 thousand tons of ore currently stockpiled at Chinese ports, roughly 80% is unacceptable.”

Nickel prices have skyrocketed in 2010, registering gains of more than 35% in the first quarter and outperforming all other metals traded on the London Metal Exchange. Compare that to a 3.9% increase in the price of copper, 2.7% for aluminum, 1.5% for gold, and 3.5% for silver.

Nickel for spot delivery at LME was $24,960 a ton as of March 31, up from $18,452 on Dec. 31, 2009. But after hitting a 52-week high of $25,011 a ton on April 1, the price went down some over the last two trading sessions and currently stands at $24,678.

To make matters worse (is that possible?), thieves are getting in to the act, and no, we don't mean the government. Hundreds of tons of nickel and copper were stolen from a Liverpool, England warehouse in May, the latest in a rash of commodity heists spurred by higher prices. The Wall Street Journal reported that the metals were taken from Liverpool's docklands area that was owned by warehousing company Henry Bath & Son, a unit of J.P. Morgan Chase & Co.

But help may be on the way.

China's largest nickel producer, the Jinchuan Group, has offered $150 million to buy Canadian nickel miner Crowflight Minerals’ assets in Manitoba and Ontario, which could spur production. Japan’s Sumitomo Metal Mining announced that it will increase its nickel production by 23% to 41,000 tons this fiscal year. In addition, Australian miner Mincor Resources says it is exploring the reopening of its Miitel mine in Western Australia, which it had shut down following a sharp slump in nickel prices in 2008.

9 Comments – Post Your Own

#1) On August 13, 2010 at 10:45 AM, dragonLZ (99.27) wrote:

Here is the chart showing Nickel prices for the last 6 months:

 

And here is the chart showing 5-Y Nickel prices:

And based on this chart (6-Month LME Nickel Warehouse Stock Level), it looks like either more Nickel is being used lately or less is being produced (both will cause higher Nickel prices):

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#2) On August 13, 2010 at 11:00 AM, dragonLZ (99.27) wrote:

Last time the prices of Nickel exploded (2005 - 2007), OM Group Inc. (OMG) was one of the companies that nicely profited from it.

Since then, OMG has moved into other areas that have to do with specialty chemicals and advanced materials, so I'm not sure if they still can be considered one of the players in the "Nickel field".

OM Group, Inc. is a leading global solutions provider of specialty chemicals, advanced materials and unique technologies crucial to enabling our customers to meet increasingly stringent market and application requirements. The company serves a wide variety of sectors, including rechargeable batteries, electronic devices, cutting tools, petrochemical catalysts, electronics manufacturing, industrial coatings, defense, aerospace, and medical devices. Headquartered in Cleveland, Ohio, OM Group operates manufacturing facilities in the Americas, Europe, Asia and Africa. We employ approximately 2,900 associates worldwide. OM Group stock trades on the New York Stock Exchange under the symbol OMG.

OMG is the world's leading producer of cobalt-based specialty chemicals and a leading supplier of nickel-based specialty chemicals.  We also produce specialty chemicals and advanced materials from barium, calcium, iron, manganese, potassium, rare earths, zinc, zirconium, germanium and copper.  Through next-generation technologies that address the universal need for affordable energy, portable power, clean air and clean water, we are delivering solutions with tangible social benefits.

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#3) On August 13, 2010 at 11:27 AM, dragonLZ (99.27) wrote:

Stainless steel producers are the major users of Nickel not just in the U.S., but around the world as well.

Now, with this industry being a buyer of Nickel, one might think that they get hurt by higher Nickel prices, but they actually bust their profits by raising their prices every time Nickel prices go up (Their customers have no choice but to "live" with the price increases).

 

Allegheny Technologies Incorporated (ATI) is a diversified specialty metals producer. The Company’s products include titanium and titanium alloys, nickel-based alloys and superalloys, zirconium, hafnium and niobium, stainless and specialty steel alloys, grain-oriented electrical steel, tungsten-based materials and cutting tools, carbon alloy impression die forgings, and large grey and ductile iron castings. ATI’s specialty metals are produced in a range of alloys and product forms. The Company focuses on its technological and unsurpassed manufacturing capabilities to serve global end use markets with diversified and specialized product offerings. ATI operates in three segments: High Performance Metals Segment, Flat-Rolled Products Segment and Engineered Products Segment.

 

 

Universal Stainless & Alloy Products, Inc. (USAP) manufactures and markets semi-finished and finished specialty steel products, including stainless steel, tool steel and certain other alloyed steels together with its wholly owned subsidiaries. The Company’s manufacturing process involves melting, remelting, heat treating, hot and cold rolling, machining and cold drawing of semi-finished and finished specialty steels. Its products are sold to rerollers, forgers, service centers, original equipment manufacturers (OEMs) and wire redrawers. Customers further process its products for use in a range of industries, including the aerospace, power generation, petrochemical and heavy equipment manufacturing industries. The Company also performs conversion services on materials supplied by customers.

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#4) On August 13, 2010 at 12:11 PM, JaysRage (90.08) wrote:

Thanks for the post.   Very informative post about a nice short-term opportunity.  

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#5) On August 13, 2010 at 1:26 PM, dragonLZ (99.27) wrote:

Thanks Jay.

Do you know of any Nickel miners? 

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#6) On August 17, 2010 at 1:53 PM, JaysRage (90.08) wrote:

Nickel Stocks On NYSE

Companhia Vale Rio Doce (NYSE: VALE): With their acquisition of Inco, they became a global leader in nickel production.

Norilsk Nickel (NILSY.PK) - The Russian nickel giant also produces copper, palladium, platinum, silver and gold, along with byproducts like cobalt, rhodium, iridium, and ruthenium.

Lundin Mining (NYSE: LMC) - The purchase of Rio Narcea adds nickel to their metal portfolio

BHP Billiton (NYSE: BHP): BHP Billiton plc is a diversified natural resources company. The Company is engaged in extracting and processing minerals, oil and gas from its production operations located primarily in Australia, the Americas and southern Africa.

North American Palladium (NYSE: PAL): North American Palladium Ltd. (NAP) is a Canada-based precious metals company with assets in mining in Canada.

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#7) On August 18, 2010 at 1:20 AM, dragonLZ (99.27) wrote:

Thank you very much, Jays.

Do you know what happened to LMC? Can't find the ticker that works.

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#8) On August 18, 2010 at 1:31 AM, portefeuille (99.59) wrote:

#7

http://ca.finance.yahoo.com/q?s=LUN.TO

http://finance.yahoo.com/q?s=lunmf.pk

http://www.lundinmining.com/s/Investors.asp

 

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#376) On March 27, 2009 at 1:17 PM, portefeuille (99.94) wrote:
LMC - 1.55 - outperform

#874) On November 22, 2009 at 8:37 AM, portefeuille (99.94) wrote:
LUN.TO (LMC) - end outperform - 4.42 (4.74 CAD) - new rating: market perform

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(from here)

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#9) On August 18, 2010 at 1:55 AM, portefeuille (99.59) wrote:

Sri Lanka is hot, by the way ...

http://www.cse.lk/

http://noir.bloomberg.com/apps/cbuilder?ticker1=CSEALL%3AIND

http://noir.bloomberg.com/apps/cbuilder?ticker1=CARS%3ASL

http://noir.bloomberg.com/apps/cbuilder?ticker1=BUKI%3ASL

http://noir.bloomberg.com/apps/cbuilder?ticker1=SPEN%3ASL

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