Nickel metal industry at a turning point?

Industrial metals have taken place since the outbreak of the financial crisis, large price fluctuations. The roller coaster ride was and is due to economic factors, as well as determined by the funding and production situation in the mining sector as well as the monetary environment in the markets. The latter has been improved by the recent expansionary measures of the major central banks.

Liquidity based courses

The third program of quantitative easing (QE3) by the U.S. Federal Reserve, the commodity prices, particularly for metals, strong drive in the coming months upwards. This proposition is the essence of a new Goldman Sachs study to the commodity market. But you have to see this prediction in the overall context. For example, the nickel price has dropped since its last high in February 2011 by about 38 percent - in the cyclical low of August this year had extended even to the minus 48 percent.




Of new records is one that is miles away. Other metals such as aluminum and copper have similar chart patterns. That prices had fallen so sharply, the weakening global economy is thanks to. Nickel is used primarily in the steel industry for the production of stainless steel. The present recession in China and the weak U.S. economy have pushed down steel consumption significantly - to say nothing of the situation across the EU. Will reduce nickel demand was with the known consequences for the world market price. On the supply side, we are dealing with a mixture of rising costs of production and high cost of capital to finance the often gigantic mining projects.
Strong pressure on prices in the mining sector

Thus, the price for a metric ton of copper production in the last ten years has doubled from 3,500 to around $ 6,000 almost, for nickel is the same relationship. Reason is the geology: Since the grade of the rock becomes less and less supported, you need more material to produce the same amount of copper, nickel and other metals. This is only possible with capital deepening and the margins of producers fall. Sooner or later the higher production costs due to price increases and then find a lower offer input into the metal trade and prices rise.

Technical analysis with positive signals

Nickel has lost since its last cyclical peak in February 2011, almost half of its value. Even more extreme, but it was after the all-time high of 2007 down, as the collapse of Lehman Brothers, the global economy in the second half of 2008 brought to falter. The price of nickel fell by 54,000 to $ 8,800. Is correspondingly high potential for recovery, the fraction of the downward trend that started in February 2011 signaled. From the perspective of technical analysis medium-term potential exists to $ 22,000, representing an increase of approximately 20 percent.

Conclusion

The market environment is currently speaking in joining the industrial metals. The central bank liquidity and the prospect of an economic turn for the better in China, the U.S. and Europe should give the metal prices in the coming months buoyancy. A certain economic risk is certainly not be explained away, and a resurgence of the Euro crisis would be negative.