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Will Nickel Price Sustain Rising Strength from Philippine Audit News? SMM Reports

iconDec 6, 2016 15:47
Base metal prices mostly closed lower last Friday (December 2), except nickel, which reported a big gain. Why?

SHANGHAI, Dec. 6 (SMM) – US’s nonfarm payroll report for November missed market expectation, but the unemployment hit the lowest level since August 2007, growing market estimation on US Federal Reserve’s rate hike in December’s meeting.

Base metal prices mostly closed lower last Friday (December 2), except nickel, which reported a big gain. Why?

China Reports Continuous Declines in Nickel Ore Port Inventories, SMM Reports

Nickel market fundamentals in China have not improved significantly recently. Despite falling inventories of refined nickel and nickel ore, downstream buyers in China made small purchases after nickel price surged in early November. This, together with off-season in downstream market, led to light trading in China’s refined nickel, NPI and stainless steel markets.

All these gave no price boost to nickel prices. However, one piece of news from the Philippines buoyed up LME nickel to $ 11,555 per tonne last Friday, up by 2.5% within a day, and SHFE 1705 nickel climbed to 95,850 yuan per tonne, up 3.17% during Friday’s night trading.

On December 2, Philippines’ Department of Environment and Natural Resources (DENR) said to release the final audit result very soon. The Secretary Regina Lopez said there will definitely be suspensions, and she also pointed out that many companies didn’t allocate enough budgets for rehabilitation while going through with the mining audit report.

According to the Philippine Mining Act, a Mine Rehabilitation Fund (MRF) shall be deposited as a trust fund in a government depository bank and shall be used for rehabilitation.

To recall, the DENR released September 27 the initial audit result of 40 mining firms, with 11 mines (including 5 nickel mines) passing the audit, 9 mines (including 7 nickel mines) shutting down and 20 mines (including 15 nickel mines) being recommended for suspension. The passing rate of 27 nickel mines was only 18.52%, and output at 20 nickel mines facing suspension accounted for 55.5% of Philippines’ nickel ore output last year, according to data released by Philippines Mines and Geosciences Bureau (MGB).

The DENR sent out show-cause letters in late October to mines being recommended for suspension, and those mines will be given seven days to respond and the inspection team will review them then. But, the final audit result has been postponed several times.

Latest news report the final result will be delayed to December 15.   

“The latest gain is because of market speculation, especially when major ore producing regions in the country are in the monsoon season, and the impact on market fundamentals is small,” SMM nickel analyst says. 

At present, CIF traded prices for Ni 1.5% ore are up to $48 per wmt, up $12 per wmt from the level seen in early October, according to SMM data.

So far, no detailed information about the final result is available, such as the proportion of closure, conditions for production resumption, and etc. So, the concrete impact on nickel price will not be reflected until release of the final result, SMM adds, despite the positive impact from ore shortages.

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