St George Mining Ltd (ASX:SGQ), Panoramic Resources Ltd (ASX:PAN) and Legend Mining Ltd (ASX:LEG) are among the companies that could benefit from the recent increase in global interest for nickel owing to improved market fundamentals which are supporting strong prices.
St George and Legend have exploration projects in WA which are highly prospective for nickel and Panoramic's Savannah is a recommissioned nickel project that is exporting ore to China out of the port of Wyndham, in WA’s northwest.
Following is an extract from a commentary on nickel written by Gavin Wendt, founding director of MineLife and a resources analyst with industry-leading credentials:
Expectations of booming demand for electric vehicles have bolstered the longer-term bull case for nickel, and a likely supply crunch. Nickel is now up 65% since the start of the year, hitting $18,000 a tonne this week, its highest level since September 2014.
Indonesia’s mine minister has followed through on recent threats to expedite the reinstatement of a ban on unprocessed ore exports first mooted for 2022. Indonesia will stop nickel ore exports from 1st January 2020 – two years earlier than initially flagged - as it speeds up efforts to process more of its resources at home.
Goldman Sachs has raised its 12-month price outlook from $16,000 to $22,000 per tonne, on the back of supply-side issues. The International Nickel Study Group highlights that the market was in a deficit of 146,000t last year, with an 84,000t gap expected this year - but this could grow.
With Indonesia’s export ban being brought forward, a much larger than anticipated deficit for next year may be looming, with about 10% of global supply expected to be removed. The deficit comes at a time when stockpiles on the London Metal Exchange represent only two months’ supply – hovering around 150,000t since July.
China’s nickel pig iron production fed from Indonesian and Philippine mines dominate the global industry, and despite the economic slowdown in China, which imports some 50% of the world’s nickel, stainless steel production is growing rapidly.