Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stock Market Up 8 Out of First 9 months - 13th Dec 24
What Does a Strong Sept Mean for the Stock Market? - 13th Dec 24
Is Trump the Most Pro-Stock Market President Ever? - 13th Dec 24
Interest Rates, Unemployment and the SPX - 13th Dec 24
Fed Balance Sheet Continues To Decline - 13th Dec 24
Trump Stocks and Crypto Mania 2025 Incoming as Bitcoin Breaks Above $100k - 8th Dec 24
Gold Price Multiple Confirmations - Are You Ready? - 8th Dec 24
Gold Price Monster Upleg Lives - 8th Dec 24
Stock & Crypto Markets Going into December 2024 - 2nd Dec 24
US Presidential Election Year Stock Market Seasonal Trend - 29th Nov 24
Who controls the past controls the future: who controls the present controls the past - 29th Nov 24
Gold After Trump Wins - 29th Nov 24
The AI Stocks, Housing, Inflation and Bitcoin Crypto Mega-trends - 27th Nov 24
Gold Price Ahead of the Thanksgiving Weekend - 27th Nov 24
Bitcoin Gravy Train Trend Forecast to June 2025 - 24th Nov 24
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The Nickel Supply Squeeze Is Just Getting Started

Commodities / Nickel May 28, 2014 - 04:02 PM GMT

By: Investment_U

Commodities

Back in January, I wrote a column explaining the supply-demand squeeze in nickel.

One way I suggested to play the nickel squeeze, the iPath Dow Jones-AIG Nickel Total Return Sub-Index ETN (NYSE: JJN), is up 38% from my recommendation.

Did you buy that fund? Well, if you didn't, there's no need to kick yourself.


The nickel run isn't over.

In fact, if anything, the supply/demand squeeze powering nickel's surge is likely to get stronger.

The biggest user of nickel is China. Nickel is used to make stainless steel, and China makes a lot of it. Stockpiles of nickel in China are falling. According to Deutsche Bank, China's nickel stockpile is now down to one month's supply, a drop of 26% in just a month.

A big supply crunch is coming for China.

What's more, the global nickel market will swing to a deficit of 132,200 tons next year from a surplus of 13,800 tons this year, according to Citigroup.

What will that do to prices? The price of nickel was recently $8.91 per pound, or $19,615 per metric ton. Citi forecasts nickel prices to rise to more than $30,000 per metric ton next year. That's a rise of more than 50%!

The Source of the Problem

Indonesia's ban on nickel ore exports has removed close to a third of the world's supply. Indonesia's raw nickel exports have gone to zero. Everybody thought there would be relief to this thanks to an election in April, but that didn't work out.

Now Indonesia says it is furiously building nickel smelters to fix the supply crunch. And that's a good idea, except for one thing: power.

The government is talking up the number of planned smelters. Two ferronickel and seven nickel-pig-iron smelters should be completed this year, according to the Energy and Mineral Resources Ministry.

What's more, the ministry says as many as 63 smelters may be built by 2017, including 40 nickel plants, 10 iron ore smelters and four copper-cathode smelters.

However, many of these mines are scattered over Indonesia's 17,000 islands. How are they going to get power to all those new smelters?

I'll tell you how: They won't. The whole thing is pie in the sky.

According to an analysis from Standard & Poor's, smelters at new mines are horribly expensive and a drag on profitability.

"For a greenfield nickel smelter to be economical, capacity must be at least 10,000 or 15,000 tons of contained nickel per year," the S&P report said. "Such a smelter would require several hundred megawatts of electricity capacity and more than $1 billion in investment."

So maybe the Chinese will pony up money for the smelters. Are they going to pay for a power grid that can connect to outlying islands, too?

The Government Doesn't Care

Do you think any of this worries the Indonesian government? Ha!

Sure, lack of supply will put upward pressure on nickel prices. And nickel miners are being thrown out of work. But the fact is, the Indonesian government really doesn't care.

That's because it taxes finished nickel exports, and as the price of nickel goes higher, the taxes it collects will more than make up for what it formerly collected on nickel ore.

So why would the Indonesian government solve a problem that puts more money in its pockets?

Meanwhile, the price of nickel is going up and up and up.

Good investing,

Sean

P.S. As recently as 2005, America's energy industry faced the same sort of supply-demand crunch. But then came an incredible invention. Not only did it revolutionize an industry... it's still spawning overnight millionaires. To get my full take (with several profit opportunities) on the technology, click here.

Source: http://www.investmentu.com/article/detail/37689/nyse-jjn-nickel-supply-squeeze-starting

http://www.investmentu.com

Copyright © 1999 - 2014 by The Oxford Club, L.L.C All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Investment U, Attn: Member Services , 105 West Monument Street, Baltimore, MD 21201 Email: CustomerService@InvestmentU.com

Disclaimer: Investment U Disclaimer: Nothing published by Investment U should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Investment U should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Investment U Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in