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Nickel rockets to 15-month highs on increasing demand from China

Resurgent demand from Chinese steel mills has boosted the nickel price to highs not seen since September 2019.

Blackstone Minerals Ltd - Nickel rockets to 15-month highs on increasing demand from China
This is good news for ASX-listed nickel hopefuls.

Nickel is experiencing a resurgence brought on by demand from China and a more positive iron ore outlook, pushing prices to US$17,650 per tonne.

The last time the nickel price was this high was in October 2019 and if it continues its sharp increase – it has risen 11 per cent since December 2 – it will top the US$18,000/tonne prices seen in September last year.

Nickel prices have been high before – most notably skyrocketing in 2007 amid the resources boom to over US$50,000/tonne – but had slipped considerably this year, to lows of US$11,055/tonne.

Nickel in demand

Nickel is most often used in stainless steel; about 68 per cent of the world’s nickel is used for this purpose, hence China’s increased demand.

It is also commonly used in copper and steel-based alloys, plating and foundries, and is also used in batteries, meaning demand for the metal is being driven by the ever-increasing growth of the battery sector.

It is used in hybrid electric vehicles, for example, a market which is due to hit AU$1.1 billion by 2027.

Independent analyst Robin Bhar says the nickel price jump is not surprising.

“Demand for stainless steel has been strong this year, particularly out of China, and that’s driving the market because it’s 75% of usage,” he said.

“There is also a need for prices to remain attractive - above $15,000-$16,000 - to provide an incentive for miners.”

Price rebound

The current nickel price represents a rebound of nearly 60 per cent from March lows, when China was struggling with COVID-19.

Prices of Chinese iron ore futures have also risen, putting further upward pressure on prices.

In the meantime, nickel stocks held in Shanghai Futures Exchange warehouses have fallen to 18,361 tonnes, the lowest since mid-2019.

Conversely, stocks in LME-registered warehouses are over 240,000 tonnes, the highest since mid-2018.

ANZ analysts are predicting the nickel price to stabilise at around US$16,500 per tonne in 2021.

Nickel hopefuls

That’s good news for ASX-listed nickel hopefuls, of which there are many, including:

Blackstone Minerals Ltd (ASX:BSX) (OTCMKTS:BLSTF) is developing the Ta Khoa project in Northern Vietnam; it has a maiden resource estimate and a scoping study for the large-scale Ban Phuc nickel-copper-PGE deposit. The company is driving the past-producing project towards production and has downstream value-add intentions.

Chalice Mining Ltd (ASX:CHN) (OTCMKTS:CGMLF) has had a bumper 2020, seeing its shares skyrocket in the back of a globally significant, high-grade PGE-nickel-copper-cobalt discovery at its Julimar project in Western Australia.

Legend Mining Limited (ASX:LEG) is attracting plenty of attention with exploration success at the nickel-copper Rockford project in Western Australia’s prolific Fraser Range and earlier this week announced it had identified new nickel-copper targets in the area’s northwest.

Galileo Mining Ltd (ASX:GAL), too, is focused on the exploration and development of nickel, copper and cobalt resources in the Fraser Range and is set to step up its nickel exploration.

Auroch Minerals Ltd (ASX:AOU) is focused on its Saints and Leinster nickel projects in Western Australia and is ramping-up exploration at its multiple high-grade nickel sulphide targets.

- Daniel Paproth

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