Recent surge in nickel price forecast to continue for 1991

The shares of nickel producers have strengthened in recent weeks in reaction to a sudden jump in the nickel price, and some analysts are calling for further price increases by year-end. Major producer Inco (TSE) is hovering just cents below its 52-week high of $40 as nickel, which reached a 5-month high of US$4.22 at the end of March, holds its own above $4.

Among the junior issues, Redstone Resources (TSE) traded as high as $1.80 before dropping back to close at $1.71 on April 9. Redstone owns 1% of the Falcando nickel operation in the Dominican Republic.

Black Hawk Mining (TSE), with two low-grade nickel plays in Manitoba and Maine, reached 60 cents on a 52-week range of 35 cents-$1.10.

Analysts attribute the surge in the nickel price to, among other developments, strikes at two Soviet nickel mines, including the Taymir nickel mine at the large Norilsk nickel complex. Although it is unknown if the disputes have been resolved, future disturbances at Soviet mines are considered likely.

The Soviet Union produces about 90,000 tons of nickel, or roughly 14% of world consumption.

For most of 1991, nickel has been trading between US$3.80 and $4, but some analysts believe the price will move up significantly during the remainder of the year.

“We’re probably going to see much, much higher levels before year-end,” said one Toronto-based analyst, who preferred to remain anonymous. He is calling for US$6 nickel by the end of 1991.

While both Inco and Falconbridge are expected to avoid strikes in reaching new contract agreements at their Sudbury operations this spring, other factors point toward higher prices for nickel.

Low scrap levels, for instance, are forcing European producers to turn more toward primary sources of nickel for smelter feed. Meanwhile, consumption in Japan, originally expected to decline this year, looks as if it will match or even exceed 1990 levels.

An upturn in the U.S. economy, predicted for the second quarter, is also expected to bolster base metal prices, including nickel.