The nickel wars are afoot, as billions of dollars are at stake on whether the best performing commodity of the past year will continue its surge or start to depreciate. Nickel is used in making stainless steel, which saw record levels of production and demand in 2006, causing a 147% spike in nickel’s price per ton.
Deutsche Bank thinks nickel prices will continue to climb, based on strong demand that will still outstrip record Chinese capacity for production. Morgan Stanley and UBS agree, with analysts from each bank betting on at least a 32% rise in nickel prices this year.
Ready to take on the quorum of nickel bulls is JPMorgan. The bank is betting that nickel prices will drop in the coming year, citing that the price pressures of the past year will come into play and force a slowdown in the nickel spike. High nickel prices have increased the use of alternative materials like cheaper nickel pig iron in stainless steel manufacturing and companies have resorted to using a lower percentage of stainless steel in products to temper production costs. Historically low nickel inventories of last year are already rising in certain countries like the US, reflecting a decrease in nickel demand. JPMorgan is also following a historical trend – for the past 20 years, nickel prices have dropped following a year in which its price doubled. Merrill is also bearish on nickel prices this year.
Deutsche, Morgan Stanley and UBS vs. JPMorgan and Merrill – this could definitely escalate quickly, and Stan O’Neal has killed people with a trident before. Jamie Dimon even has JPMorgan analysts spending a mandatory 20 hours a week in 277 Park Avenue’s smelting chamber, melting nickels, and cell phones, looking for trace amounts of the metal. Nickel prices are so high that the US nickel is worth more than a nickel:
Metals prices are so high that the U.S. Mint last year banned exports of nickels to prevent scrap merchants from melting down coins in developing countries. The 5-cents coin, which is 25 percent nickel and 75 percent copper, contains metal currently valued at 7 cents.
Nickel Price Outlook Divides Deutsche Bank, JPMorgan – [Bloomberg]