eBusiness Weekly
Tawanda Musarurwa
Patience is a virtue in life, and that also applies to business.
But solely producing and selling a commodity whose price has been in the doldrums protractedly, and hit a 13-year low in February 2016 and failing to recover significantly, can be quite enigmatic.
That is Bindura Nickel Corporation (BNC)’s dilemma.
Nickel is a very popular component of alloys.
Its price is therefore significantly influenced by the situation in different industries such as steel and car production, and consequently to some geo-political factors.
Around 70 percent of the world’s nickel is used as an alloying input in the production of stainless steel.
But “conventional” nickel took a major hit when in the middle part of the previous decade the Chinese, discovered a technology that had been explored but never developed — nickel pig iron (NPI) — as a cheaper alternative to nickel’s astonishing bull-run to more than US$50 000 a tonne in 2007.
Production of NPI in Indonesia and the Philippines resulted in the nickel price to crash to less than US$10 000 in 2016.
From then on, producers of “conventional” nickel have struggled to adjust, with BNC even putting on hold a Smelter Restart Project.
The nickel miner has said the project will only become viable at a nickel price of at least US$16 200 per tonne.
According to BNC chairman Muchadeyi Masunda, the outlook on the nickel price is not totally bleak.
“A boost in the consumption of Nickel Sulphate, which is used in the manufacture of batteries, is expected to start in 2020, at the earliest. New Nickel Sulphate capacity is being built, with some global operations expected to ramp up as from 2019.
“Macro-economic factors have been more detrimental in their effect on price movement than the factors referred to above. For instance, the trade wars between the United States of America and China, rising interest rates, a strong United States dollar and slower economic growth in China, have become the major forces behind the subdued nickel prices.
“Technically, the nickel price will be on the downside, especially given the poor risk appetite induced by the ongoing trade tensions, the mounting concerns over Chinese economic growth, the sell-offs in equity markets as well as the strength of the Dollar. However, prices are expected to make a rebound if the United States of America and China finalise a trade agreement,” he said in a statement accompanying the company’s half-year results to September 30, 2018.
And BNC’s US$16 200 price target is not, however, completely utopic.
From the historic low in February 2016, nickel prices have rebounded by 61 percent and averaged at US$13 392 per tonne in the first quarter of this year.
The World Bank in its commodity forecast report estimated that the average spot price for nickel will grow slightly further in 2018 to US$10 559 per tonne from $10 100 in 2017. It projected that over the next decade, the price will grow to $18 000 per tonne.
Analysis and consultancy company Fitch Solutions Macro Research has revised downwards its forecast nickel price for 2019 from US$15 000 per tonne to US$14 500, attributable to geo-political issues.
“Nickel was on track to beat the rest of the metals complex in June 2018 before prices were dragged lower by negative market sentiment as a result of the escalating US-China trade dispute,” said the consultancy firm in its recent report, “Commodity Price Forecast — Nickel: Downside Revision Due To Short-Term Headwinds”.
