Amur Minerals Corporation - Re: AMC Stream Log - MINESITE Nickel Is Still Up...

MINESITE Nickel Is Still Up By 39 Per Cent This Year, In Spite Of The Recent Correction.. Nickel has been a star performer in 2014. A year, so far, in which many markets have recorded lacklustre returns. So the 49 per cent gain that nickel had made by last week made it quite exceptional. It is therefore perhaps not surprising that it was due for a correction. That duly happened last week and saw the price fall 11 per cent before recovering a little by the close. All that does is reduce the year to date gain to 39 per cent and still beats the socks of most equity and bond markets. Anyone thinking that this marks the top of the market needs to be aware of the research from Macquarie and Citicorp. The Australian investment bank recently raised its nickel price forecast for the fourth quarter of 2014 to US$23,500 tonne. That though seems tame compared to that from the US bank of an average price of US$30,000 a tonne it now expects for 2015. There is now widespread consensus that a recovery is underway in most parts of the developed world. It might be low key compared to recoveries in the past but it is happening all the same. A 13.2 per cent increase in US housing starts this year to an annual rate of 1.07 million is further confirmation of the trend. Other capital markets are taking a more cautious view. Equities in the developed world have, at best, trod water this year, even if they have, grudgingly, made new highs. Bonds have done surprisingly well which rather suggests that some investors are preparing for more subdued times, or perhaps higher volatility in the months to come. Either way it is clear that without a specific story, as there is with nickel, riskier assets are being shunned in favour of more defensive ones. That is most obvious in small growth companies that have suffered a large de-rating in favour of larger and less risky global mega-caps. The large mining companies fall into this category and they have certainly experienced a recovery in valuations. Although that may be in part due to expectations of corporate activity. What the action in nickel has clearly demonstrated though is the low correlation that commodity markets have with other asset classes. Even though base metals as a whole are virtually unchanged for the year so far, the individual dynamics of each metal are vitally important. Nickel is in the sweet spot of having an improving demand and supply balance that has then had an interruption to the supply chain imposed on it. It also benefits from being a relatively small industry with only a few major suppliers. Finally, after many years of suffering the woes from single metal miners the industry is now mostly composed of mining conglomerates that can afford to close mines completely in order to defend prices. That was something the old mono-metal miners simply could never afford to do. Every company needs revenue and if your only source is selling nickel your business strategy is pre-determined. This dramatic evolution of the mining industry should act to reduce volatility and improve returns for investors. This year nickel has proved that point very well.