Nickel prices on the London Metal Exchange are likely to trade within a range of $17,000-23,000/mt in 2015, Alto Capital research analyst Carey Smith said Friday.
"Prices will average around the $20,000/mt level due mainly to the Indonesian nickel ore ban and an expected shortfall in supply in early 2015," Smith said. The average price for 2014 is expected to be $18,000/mt.
Indonesia banned the export of nickel laterite ore in January. Nickel on the LME has been trading in a narrow band of $18,200-20,000/mt, up almost 40% from $14,000/mt at the start of the year but down from a year-to-date peak at $21,500/mt in early May, the data showed.
On Thursday, the price of nickel on the LME was $17,210/mt.
China, which relies heavily on ore from Indonesia to produce nickel pig iron, had a stockpile of around 25 million-30 million mt of ore, but this is slowly disappearing and Smith said he expected the stocks to hit the bottom by early next year.
"At the moment, China buys from the Philippines, but this is a low-grade ore, so they're in the process of building smelters in Indonesia to meet their nickel pig iron needs," he added.
Around six to 10 nickel pig iron plants were currently waiting for approval in Indonesia, Smith said, adding that he did not, however, expect all the projects to go ahead.
The earliest the plants will come online will be the end of 2015, he said.
Smith said he did not think the Philippines would ban nickel ore exports, something that was considered likely after a draft proposal to change the mining Act is submitted next year.
The Philippines was benefiting from the Indonesian ban, seeing prices for the ore double, he added.
Philippine laterite ore was selling at $23/mt around this time last year, but were currently over $50/mt, Smith said.
He forecast that China's demand for ore would grow. Its nickel pig iron production in 2014 fell to 350,000 mt from 500,000 mt last year.
He said he expected the decline to continue in 2015 to 200,000 mt due to ore supply tightness.
"China will need to source from other suppliers and will be looking for material from nickel sulphide producers as well as drawing down from LME stockpiles," Smith said.
