Nickel's Star Turn

The price of nickel soared for the second consecutive week on strong demand for stainless steel in China. Gold benefits from sabre rattling in the Middle East as Iran captures a UK-flagged oil tanker.

Like Comment

Nickel was the star performer last week for the second consecutive period, up 9.1% after rising 8.0% the previous week, closing in London on Friday at US$14,700/t. The metal has risen by more than one-fifth since the start of the month, and burst above US$15,000/t on Thursday before profit-taking forced an end-week retreat.

Analysts attribute the strong performance of nickel in July to strong demand from China (production of high nickel content stainless steel has surged) and heavy forward buying by European auto manufacturers. Nickel is a key component in batteries, and is widely tipped to be one of the main beneficiaries of cleaner energy.

Uranium is also in the news after President Trump unexpectedly announced last week that imports of the nuclear fuel were not a threat to national security. Instead, he ordered a 90-day review of the entire nuclear supply chain to identify ways to revive and expand domestic production of uranium. As the Financial Times noted, the US imports 93% of its commercial uranium. The metal is currently trading at only US$25/lb, having been priced at over US$70/lb before the Fukushima nuclear-reactor disaster in 2011.

Having risen by over 12% in the four weeks to June 25, reaching US$1,436/oz, gold has generally traded over the past month in a broad band of US$1,400-1,420/oz. The precious metal soared, however, from only US$1,405/oz on Tuesday to US$1,446/oz on Thursday following Iran's capture of a UK-flagged oil tanker in the Strait of Hormuz. Gold subsequently retreated, and was trading on Saturday up 0.6% on the week at US$1,425/oz.

The price of gold has benefitted from concern over the global economy, and this worsened last week with the announcement that China's GDP grew at only 6.2% year-on-year in the second quarter, the slowest pace in almost three decades. Gold's price performance this year has also been helped by the growth in gold exchange traded funds (ETFs) over the past two months, see graph (from the Financial Times) below.

Iron ore continued its stellar performance, with 62% Fe material up another 2.8%, closing in London at US$121.9/t. Copper was almost as strong, up 2.1% at US$6,079/t, with aluminium up 1.1% at US$1,848/t. Zinc was the only major metal to decline last week, down 0.2% to close in London at US$2,425/t.

Germany's Defence Minister, Ursula von der Leyen, has been elected as the new president of the European Commission, and becomes the organisation's first female leader, and the first from Germany in half a century. An early worry for Ms von der Leyen will be a warning from the OECD that Europe is not well enough prepared for an economic shock. In an interview with the Financial Times, the OECD's chief economist, Laurence Boone, warned last week that the EU needed to loosen its purse strings.

Ms von der Leyen will also have to address the Brexit issue. Concern over a 'hard' departure of the UK from the EU caused sterling to sink last week to its lowest level against the dollar in more than two years

Mining News

The World Bank International Arbitration Tribunal has awarded almost US$6 billion in damages to Antofagasta following a seven-year legal battle with the government of Pakistan over the Reko Diq project owned by Tethyan Copper Co. The company, a joint venture between Antofagasta and Barrick Gold, had been unexpectedly denied a mining lease by the government, which claimed security issues and local opposition.

In Tanzania, the government has ordered Acacia Mining to stop using a waste-storage facility at its North Mara gold mine, which had incurred a fine in May for deficiencies. Meanwhile, Barrick Gold has raised its offer for the 40% of the company that it does not already own, and continues to argue that a full takeover is the only way to resolve a two-year tax disagreement with the government.

Rio Tinto has warned of further delays and cost increases at its Oyu Tolgoi copper project in Mongolia. The first sustainable production is not now expected until the second half of 2022, a delay of at least 16 months, and the cost is expected to increase by US$1.2-1.9 billion from the original estimate of US$5.3 billion. Rio owns 50.8% of Toronto-listed Turquoise Hill Resources, which owns 66% of the project, with the remainder held by the government. 

Chris Hinde

Chief Commentator, Mining Beacon

Previously editorial director of Mining Journal, and more recently head of S&P Global Market Intelligence's metals and mining team, Chris is now Mining Beacon's editor-in-chief and lead commentator. He posts two blogs every week, one on Monday reviewing market conditions over the prior week, and a second on Thursday looking at issues on the global mining scene. There is also a quarterly blog on business opportunities in the sector.