Noront Resources

Thu, Jul 9, 2009

Featured, Nickel Articles

By Leia Michele Toovey- Exclusive to Nickel Investing News

Nickel futures rose on Thursday as traders indulged in short covering with the view that demand is about to rise. Nickel futures on the MCX and the LME were tracking positive sentiment, on the indication that the global economy is stabilizing. This was a welcome turn of events: just days earlier fear of declining Chinese demand stalled prices.

The fear of stalling demand was brought to light by Macquarie Research. Supporting this view was the fall in China copper prices relative to overseas prices. Lately, the large variance in domestic and international prices has created an arbitrage opportunity; this in turn has encouraged imports of the metal into China’s domestic market. In order for nickel prices to improve in the long term, there has to be a rise in demand outside of China. So far, the increase in demand has largely been a China-only story; therefore the metal has been especially sensitive to every move the consuming giant makes. Since mid-May, domestic Chinese nickel prices have risen some 21 per cent amid restocking by stainless steel producers and speculative buying by investors.

It is hard to predict when the international demand picture for nickel will improve. Global nickel inventories remain above “normal” levels, an executive from French mining group Eramet said on Wednesday, keeping up pressure on the metal’s price. Current global nickel stockpiles, including those held at the London Metal Exchange and by producers, can supply 16 weeks of global consumption, compared with normal levels of 8-9 weeks.

Company News

European Nickel said on Wednesday it has ended a key off-take agreement with BHP Billiton. European Nickel has changed its focus, and is now looking to obtaining financing from a Chinese partner. European Nickel intends to enter into a new sales agreement, at its flagship Caldag mine in Turkey, with China’s Jiangxi Rare Earth and Rare Metals Tungsten Group Company. European Nickel has increased the amount it wanted to sell to JXTC from 50 per cent to 100 per cent by mutual agreement, to facilitate the 100 per cent debt financing of the project from a Chinese partner.

Labour talks between Vale and workers in Sudbury, Ontario collapsed six days ahead of a strike deadline. “The two sides exchanged proposals over the weekend, but talks broke off yesterday,” said Cory McPhee, spokesman for Vale Inco Ltd., the company’s Toronto-based nickel unit. Vale and the United Steelworkers last month extended a negotiation deadline by five weeks to July 12 for a labor agreement covering about 3,300 workers producing nickel in Sudbury, Ontario. The two sides aim to replace a three-year contract that expired on May 31. “Sudbury is Vale’s highest-cost operation and it’s not sustainable,” Chief Executive Officer Roger Agnelli said. Agnelli added that he wants the company’s retirement payments to be contribution-based instead of benefit-based. The union’s workers are set to strike July 12 if the employees vote to reject the offer, Wayne Fraser, director of the Ontario division of the union, said in a telephone interview. The Sudbury Smelter has been closed for care and maintenance since June 1.

Officials of Xstrata Plc and Anglo American Plc met in South Africa this week, to discuss details of the rejected merger proposed earlier by Xstrata. The purpose of the meeting was more to teach South African shareholders about Xstrata. Anglo recently rejected Xstrata’s proposal for a “merger of equals.” Xstrata’s chief financial officer, Trevor Reid, also met with Anglo’s largest shareholders, including Public Investment Corp., Sanlam Investment Management, and Metropolitan Asset Managers.