Nickel Seen Extending Rally by Goldman on Indonesia Ban

Nickel, the best-performing industrial metal this year, may extend its rally as Indonesia’s ban on unprocessed ore exports crimps supply, according to Goldman Sachs Group Inc.

Goldman raised its 12-month price target on the metal used in stainless steel to $16,000 a metric ton from $15,000, analysts including Christian Lelong said in a report today. That would mean a 10 percent gain from now. Goldman also listed zinc and palladium among its top picks on tightening supplies, while iron ore and copper have “the greatest downside” risks, it said.

Nickel climbed 4.8 percent this year, the most among the six major metals on the London Metal Exchange as Indonesia restricted shipments starting Jan. 12. The global nickel market may swing into a deficit next year, Barclays Plc and Macquarie Group Ltd. estimate, while Citigroup Inc. forecasts the price at $17,000 a ton this quarter.

“We are increasingly bullish on nickel on a 12-month horizon,” Lelong and other analysts said in the report. “The marginal cost of nickel supply will rise sharply as a result of the recent ban on unprocessed ore exports from Indonesia, with the potential for a shortage of nickel ore in late 2014.”

Goldman’s base case scenario is for a balanced nickel market in 2014 and a moderate deficit in 2015, which assumes some relaxation of the export ban by Indonesia, the top producer of mined nickel. Prices will “substantially overshoot” the bank’s projections if the country doesn’t relax the ban, according to the report.

Nickel for delivery in three months on the LME touched $14,750 a ton on Jan. 17, the highest since Oct. 30, and traded at $14,560 a ton at 1:33 p.m. in Hong Kong. Copper was little changed at $7,318 a ton and is down 0.6 percent this year.

Iron ore and copper may decline 21 percent and 15 percent, respectively, amid forecast surpluses this year, according to the bank’s report. Its 12-month estimate for copper was unchanged $6,200 a ton, it said. The outlook for the next 12 months for zinc was also remained the same at $2,100 a ton.

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