BY STAN SUDOL
The price of this strategic, silvery-white metal seems to be going as high as the nickel-containing ballistic missiles that defend North American air space. I hate to sound like a broken record, but the price of nickel keeps on breaking records!
The cash price on the London Metal Exchange briefly smashed through the psychological US$50,000 a tonne/US$22.68 a pound level on Thursday before closing at US$22.32. Overnight inventories fell by nearly six percent so nickel traders responded by driving the price of this industrially vital metal up by about seven percent.
Florida based, Marine Fasteners Incorporated is the largest fastener supplier to the marine boat-building industry in North America. Their stainless steel products require nickel for the metal’s unique corrosion resistance properties. There is no substitute.
David Long sales specialist says, “I would have never believed the price of nickel could hit such heights. Seven out of the last eleven working days, the price of nickel has set an all time high. The only people being more hurt by this trend than the stainless steel consumers like us, are the traders who predicted the market would be down by now, and bet short.”
About seventy percent of global nickel production goes to making stainless steel an alloy that is used in hundreds of thousands of consumer and industrial products. With proper care, many stainless steel products have a useful life expectancy of over 100 years, and they are totally recyclable.
Rising nickel prices are now responsible for about 60 percent of the price of stainless steel. World wide consumption of nickel is estimated to be about 3,700 tonnes per day during 2007. Last year, global nickel production was about 1.35 million tonnes.
Mr. Long also publishes a very informative website devoted to nickel and stainless steel news. [http://www.estainlesssteel.com/]
The main driver of exploding nickel prices and demand is China’s galloping race to urbanize and industrialize it billion-plus population and economy, the size and scale of which is unprecedented in human history.
China accounts for more than 60 percent of the global demand for nickel and has become the largest producer of stainless steel after Japan. China imported 86,908 tonnes of nickel in the first eleven months of 2006, a 7.6 percent increase from the same period during the previous year.
On the production side, the nickel industry has been caught flat-footed due to decades of over-supply and low prices. The present shortages go back to business and political decisions of the past twelve years in Canada and Australia.
In the mid-nineties, the discovery of the Voisey’s Bay nickel sulphide deposit in the Canadian province of Newfoundland and Labrador and the building of a nickel laterite mine and refinery – Murrin Murrin – close to the town of Leonora in Western Australia both promised to flood the world with cheap nickel. Prices at the time were hitting record lows of about US$1.76 in late 1998, ensuring that other miners stayed away from any new nickel production.
Native land claims and provincial politics – some feel Newfoundland basically blackmailed the company into uneconomic concessions – held up the Voisey’s Bay project which didn’t come on stream until last year. In addition, while Voisey’s Bay is a significant nickel deposit, initial comparisons to the enormous reserves in the Sudbury Basin have never been met. The Basin and Norilsk, located in Russia’s Siberian district are considered the two largest nickel deposits in the world. There is continued debate in geological circles about which deposit is bigger and if Russian figures can be trusted.
The Murrin Murrin refinery used a Canadian refining innovation, first used on Cuban nickel laterites in the 1960s, that entails processing ore in a sulphuric acid leach bath using high temperatures and pressures. This high-pressure acid leaching method is called HPAL.
Construction design flaws, poor materials, cost issues, disgruntled investors and billion dollar law suites and losses combined to prevent future expansion plans for this laterite project. Current laterite projects around the world have all been designed to avoid the technical problems encountered at Murrin Murrin.
With the unmet promises of these two projects and the unexpected soaring demand by China, pressure on nickel prices started in 2003. Combined with a healthy world economy and enormous military expenditures, by the U.S., Russia, China, Japan and many countries in the Middle East, that use enormous quantities of nickel-containing weapons, the price of this strategic metal began its climb to historic highs
Nickel sulphides or laterites are complex minerals that required long time lines for development, huge capital investments and technological expertise to economically refine this geologically uncommon metal. Few companies have that knowledge.
Current delays and cost blow-outs at the more advanced New Caledonia Goro nickel laterite project (60,000 tpa) and the Australian Ravensthorpe laterite development (50,000 tpa) are helping keep nickel prices in the stratosphere. The Goro project is also facing environmental issues and native Kanak opposition. CVRD Inco is also bringing into production two other nickel laterite projects in Brazil, Onca Puma and Vermelho.
CVRD Inco is conducting a comprehensive re-evaluation of the Goro project and is working to minimize political, environmental, technological and operational risks.
FNX Mining is a medium sized company working entirely in the Sudbury Basin. FNX Mining, CEO Terry McGibbons says, “With the opening of the Levack mine this year our production will grow quit dramatically. This growth will take place during a period of incredibly high nickel prices. Our breakeven price for nickel is about $3.50 a pound. Obviously the strong margins we are currently experiencing will permit us to self-finance most of our aggressive growth profile over the next two years in the Sudbury Basin.”
With the start of initial production at FNX Mining’s third facility, the Podolsky Mine, the company expects to be the second largest producer of nickel in the historic Sudbury Basin by 2009, knocking Xstrata Nickel into third place. The recent discovery at the Levack Mine of the “Main Depths” nickel-copper deposit indicates the excellent exploration potential that remains in this 120-year old mining camp. Most geological experts predict another hundred years of production at Sudbury.
Stan Sudol is a Toronto-based communications consultant and policy analyst who writes extensively on mining issues. [[email protected]]
