Nickel ETFs Rally On Russian Concerns and Indonesia Ban [iPath Dow Jones UBS Nickel Subindex Total Return ETN]

Nickel ETNWhile 2014 brought bad news for broad stock markets thanks to uneasiness over the QE taper and the resultant emerging markets concerns, geo-political issues and over valuation in stock markets, it rewarded natural resource investing with a flurry of good news.

Many commodities saw a decent start this year, with metals increasing year-to-date. Among the metals, nickel witnessed the highest gain among the six main metals traded on the London Metal Exchange (LME).

Nickel has started the year 2014 with a bang rising about 31%. Commotion in supplies which originated from geo-political tension in Russia, as well as an Indonesian export ban, were the main reasons for its outperformance.  Thanks to this, nickel price for delivery in three months peaked to the 14-month high on the LME in recent trading.

Reason Behind the Surge

First in January, nickel gained after Indonesia enforced a ban on unprocessed mineral ore shipments, effective January 12. Notably, Indonesia is the world’s biggest producer and exporter of nickel, and accounts for about 20% of global supply. Analysts commented that this ban alone will shift the nickel market from an oversupply situation (currently) to deficit situation over the coming years.

It has been over three months; Indonesia has not permitted any nickel ore exports. In early April, inventory supervised by the London Metal Exchange witnessed the biggest weekly drop since June 2012 (read: 3 Commodity ETFs Still Looking Strong).

Also, Russia – which takes the second position in terms of nickel product – has been in the news this year thanks to its annexation in Crimea and the resultant stand-off with the West. Now that Russia is again arguably venturing into Ukraine’s other territories, further protest from the West is likely to result in sanctions against Russian’s nickel exports (among other goods).

Together, the two nations satisfy more than a third of world nickel requirement thus a threat to supplies is pushing the prices higher. Moreover, with global growth remaining more-or-less on track, use of stainless and non-stainless products has been on the rise. About two-thirds of nickel is used in the making of stainless steel which in turn is giving another round of support to nickel prices.

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