Nickel - Bullish technically and fundamentally

[RichKid]

Anyone exposed to Nickel, either through futures, stocks or otherwise?
I'm trying to gain leverage to what appears to be the start of a strong run this year . Will post more on the fundamentals later but here's a chart for the TA people. Not sure what the contract types are but this one is for 'cash seller and settlement'. The chart is from the London Metal Exchange. It's either an ascending triangle or a triangle, eitherway looks bullish to me.

Please see the other threads if you want to post purely on local Nickel stocks you favour and keep this thread restricted to Nickel price. Search for 'Nickel' under search tool to find Nickel stocks on ASF.

Any comments on where Nickel is headed and why are welcome. It'll be nice to see some of you 'hot' commodities traders come out of the woodwork on ASF!!

 

[markrmau]

Re: Nickel- Bullish technically and fundamentally

I have MCR, but unforunately bought after last spike so am currently sitting on $700 loss.

On one hand, there has been a lot of hedge fund speculation, leading to some volatitilty in nickel, particularly after the recent US interest rate rises.

On the other hand, I went to china about 2 years ago, an if they replaced just 10% of the bamboo scaffolding with steel, nickel prices will go through the roof.

On my third hand, a lot of chineese steel import has possibly been due to defacto Yuan revaluation speculation by buying into shanghai and other cities property - a buble in real danger of collapse.

Overall I am not sure. I am very close to stop loss on mcr.

 

[whisky6210]

Re: Nickel- Bullish technically and fundamentally

I've been following nickel verry closely for a while, particularly in the Kambalda region of W.A.
Most of the mines are spin-offs from WMC with an estimated lifespan of 4 years (according to reports)
Others are nickel in laterite which WMC would not have a bar of....look what happened to Preston ! also Annaconda (now minara).....Heron is also nickel in laterite, however they spun off their nickel in sulphide and formed Pioneer (pio)
So it's the old story of "back to basics".
Just in closing, someone made the comment if China follows the West and converts from chopsicks to knives and forks the world will run out of nickel.
Hope this helps with your fundamentels.........

 

[RichKid]

Re: Nickel- Bullish technically and fundamentally

....if China follows the West and converts from chopsicks to knives and forks the world will run out of nickel.
Hope this helps with your fundamentels.........

Ha Ha! good point, it's easy to get carried away with the China story. I did see some figures on Nickel inventory and supply/demand etc, must dig it up sometime, I think one of the Nickel co's I was watching had it in an investor presentation. I'll post as soon as I find it although it my be a bit biased coming from a Nickel co. If steel demand is going to grow, as is the consensus, then Nickel will too, I've seen various remarks about using Nickel substitutes (or lower percentages of Nickel) and the like but the underlying demand is still strong once alternatives are considered.

Here's a graph on how much Nickel is around, not sure how much is 'hidden' and not counted but it's looking pretty bearish, in the near term we may see a fall in the price if the stock levels look like they'll increase abit (appears so from the chart). It has found some support and there have been higher bottoms since Jul 2004 so in the very near term we may see a fall in the Nickel price but the overall long term picture is different imo.

 

[BREND]

Re: Nickel- Bullish technically and fundamentally

Due to the rising base metal prices, demand for most base metals in China had slowed down, except nickel and lead. China had even recently reduced import tax on nickel, so as to cater to the rising demand of nickel.

There are many news of substitution for nickel, such as using less nickel for stainless steel production. But so far, I have yet to see any slow down in demand for nickel on a global basis.

But the worrisome for nickel is that commodity funds are having nickel interest on nickel these days. Commodity funds have been doing their re-balancing, selling off metals that have risen a lot in 2006, and buying metals that are still laggards. Since nickel had risen more than 200% in 2006, it is an obvious sell candidates for commodity funds.

http://basemetal-trading.blogspot.com/

 

[moses]

Re: Nickel- Bullish technically and fundamentally

Commodity funds have been doing their re-balancing, selling off metals that have risen a lot in 2006, and buying metals that are still laggards.

I suppose the same could be said for Zinc?

 

[BREND]

Re: Nickel- Bullish technically and fundamentally

I suppose the same could be said for Zinc?

You are very right! I heard that AIG Commodity Fund is still off nickel and zinc as part of their re-structuring strategy for 2007.

 

[BREND]

Re: Nickel- Bullish technically and fundamentally

You are very right! I heard that AIG Commodity Fund is still off nickel and zinc as part of their re-structuring strategy for 2007.

Found the details here:
http://basemetal-trading.blogspot.com/2006/12/commodity-index-re-balancing-could.html

 

[moses]

Re: Nickel- Bullish technically and fundamentally

Found the details here:
http://basemetal-trading.blogspot.com/2006/12/commodity-index-re-balancing-could.html

Thanks. It helps make sense of a few SP's atm.

 

[BREND]

Nickel price is down $1315 today, now price is $31400.
Commodity fund is selling today.

 

[traydor]

China's Nickel Demand Will Erode Supply Through 2010, Inco Says
March 29 (Bloomberg) -- China's demand for stainless steel will erode inventories of nickel faster than mines are able to boost supplies over the next five years, said an executive with Inco Ltd., the world's second-largest nickel producer.

``The nickel market is facing ongoing shortages, strong demand and limited prospects for supply growth,'' Brent Rochon, Inco's assistant vice-president of marketing, said today at the Prudential Metals and Mining Conference in New York.

The price of nickel, used mostly to harden stainless steel, has doubled in the past two years, reaching a 14-year high in January 2004. Nickel for delivery in three months fell $325, or 2.1 percent, to $15,425 a metric ton ($7 a pound) on the London Metal Exchange.

Toronto-based Inco expects reduced supplies to limit the growth in demand for the metal to about 4.1 percent this year, Rochon said. Global supplies will rise by between 55,000 and 60,000 tons, including inventories and gains in mine output of between 40,000 and 45,000 tons, he said.

``If China gets the nickel it needs for current growth plans, it could consume 45,000 tons, or 75 percent, of the extra nickel availability,'' Rochon said.

China is poised to supplant Japan as the world's largest nickel consumer and should represent about 15 percent of the global market by the middle of this year, Rochon said.

China's nickel consumption, which rose about 22 percent to approximately 160,000 tons last year, is expected to grow this year because inventories are low and demand ``continues to climb,'' Rochon said.

Rising Demand

``Last year ended with four months of growth,'' he said. ``Fourth-quarter demand was up 36 percent year-over-year and 2005 has started out even better, with the first two months more than doubling last year's levels.''

Global nickel inventories in warehouses monitored by the London Metal Exchange are down 33 percent from a year ago at 10,278 tons as of today.

Inco expects to produce 490 million to 500 million pounds of nickel this year, below last year because of maintenance at facilities in Manitoba and Ontario and lower production at its PT Inco facility in Indonesia.

``We expect the nickel market will be tight through the end of the decade,'' Rochon said. ``World supply will still not be enough to keep pace with even historic demand growth of 4 percent, and the impact of China makes a 4 percent demand growth projection seem very conservative.''

Inco's production costs this year will be about $2.15 a pound, Rochon said.

Shares of Inco fell 37 cents to C$47.25 at 1:24 p.m. in Toronto Stock Exchange trading. The stock is up 6.2

 

[Lucky_Country]

Now I know why Twiggy is setting his sights on POS claiming the world needs 3 Ravensthorpes every year just to keep up with current demand.
The Ni price has not done mush over the last 12 months and its time for a run imo.

 

[traydor]

Now I know why Twiggy is setting his sights on POS claiming the world needs 3 Ravensthorpes every year just to keep up with current demand.
The Ni price has not done mush over the last 12 months and its time for a run imo.

well nickle has averaged 4% a year for the last 15 years so the next 15 will more than likley be more considering china and india are developing.....thats 40000 tons a year

 

[So_Cynical]

well nickle has averaged 4% a year for the last 15 years so the next 15 will more than likley be more considering china and india are developing.....thats 40000 tons a year

Wouldn't u think that "bullishness" would be reflected in the SP,s of
MCR and IGO...instead there getting hammered.

 

[traydor]

Wouldn't u think that "bullishness" would be reflected in the SP,s of
MCR and IGO...instead there getting hammered.

hi i know what you mean its the same with heron i wish i knew why are those companys you mentioned are they producing ? i think the market rewards up and running companys i,m not sure but look at what fortescue had done before they produced anything......thanks

 

[nioka]

hi i know what you mean its the same with heron i wish i knew why are those companys you mentioned are they producing ? i think the market rewards up and running companys i,m not sure but look at what fortescue had done before they produced anything......thanks

There probably isn't a company more up and running in nickel than MCR. It is probably best described as galloping rather than running. With cash on hand, increasing production and a good dividend paying record what more could you ask for?. Except of course an increasing SP. Fundamentally the best nickel buy that I can think of. Anyone disagree.

 

[56gsa]

There probably isn't a company more up and running in nickel than MCR. It is probably best described as galloping rather than running. With cash on hand, increasing production and a good dividend paying record what more could you ask for?. Except of course an increasing SP. Fundamentally the best nickel buy that I can think of. Anyone disagree.

Nioka .. others to consider FXR, MRE, IGO, WSA, SMY -WSA has been strongest of these last 6-12 months with good future potential

MRE is suffering at present because of the varanus fire and doubt over supply of gas

Have nickel stocks peaked and on the way down?

 

[56gsa]

this shows WSA and FXR have done better last 6 months than other nickel stocks- FXR has been a good performer last 2 months

 

[nioka]

Nioka .. others to consider FXR, MRE, IGO, WSA, SMY -WSA has been strongest of these last 6-12 months with good future potential

MRE is suffering at present because of the varanus fire and doubt over supply of gas

My suggestion is that the SP of MCR offers better value than the others. Take SMY, the share price is much higher than MCR and according to my examination of the fundamental values they are equal with MCR having the advantage of consistant dividend payments and a good cash balance. I suggest that SMY is fully valued and MCR is undervalued by comparison.

 

[56gsa]

Noika - i presume you're bullish on nickel?

Just put together this comparison from comsec data... to read it says MCR has a average rating of 2.0 from 5 brokers (1 = strong buy, 5 = sell), currrent share price of $3.10 and then the estimates for eps and div

Based on this and looking and looking at forward PEs and div yield not much difference between SMY and MCR. MRE way ahead on div yield but this reflects their current gas problems. WSA way behind on PE but as for all of them the potential of additional resources not reflected in these stats


MCR 2/5
$3.10 2007 2008 2009 2010
EPS 51.3 36.5 48.8 37.7
DPS 12 12 15.5 12.5
PE 6.0 8.5 6.4 8.2
div yield 3.9% 3.9% 5.0% 4.0%

MRE 2.9/7
$3.85 2007 2008 2009 2010
EPS 58.3 53 59.9 35.9
DPS 40 31 37 23.6
PE 6.6 7.3 6.4 10.7
div yield 10.4% 8.1% 9.6% 6.1%

SMY 1.8/6
$4.62 2007 2008 2009 2010
EPS 58.1 42.9 73.8 62.8
DPS 12 17 23 22
PE 8.0 10.8 6.3 7.4
div yield 2.6% 3.7% 5.0% 4.8%

WSA 2.4/6
$9.67 2007 2008 2009 2010
EPS -3.7 -9.4 34.7 46.7
DPS 0 0 16 18.3
PE -261.4 -102.9 27.9 20.7
div yield 0.0% 0.0% 1.7% 1.9%

IGO 3.2/6
$5.40 2007 2008 2009 2010
EPS 90.4 50.5 47.7 59
DPS 18 12.5 10 10.5
PE 6.0 10.7 11.3 9.2
div yield 3.3% 2.3% 1.9% 1.9%

FXR none