Suspension of operations of two small nickel miners in the Philippines, run by Benguet Corp Nickel Mines Inc and Zambales Diversified Metals Corp, added to fears of further mine closures, although some sources said Wednesday that the metal's bull-run is overdone with a correction likely.
"There is no tightness in nickel, and there is no reason for the price to be this high. There is a huge amount of speculation and that is pushing the price up," Citi's director of metals research and strategy David Wilson said Wednesday.
Wilson said the closure of the two mines would have little impact on the Philippines output, with production from Benguet's operations at around 5,000 mt a year of nickel.
He added: "There will be a correction to the downside, [nickel] should be in the $9,000s, and I think we will see it go there."
A trader said he thought the closure was the government sending a signal to the larger miners.
"Two small mines have closed, but I think few more will go. It is just to scare the big guys to meet the environmental standards quicker."
The country's new environmental minister, Regina Lopez, aims to implement tough reforms, according the Department of Environment and Natural Resources of the Philippines.
A statement on the DENR website said: "The suspension of the two mining companies stemmed from various alleged environmental crimes, violations of the mining and environmental laws, and complaints of various groups against the alleged environmental impacts of their mining operations."
Nickel Asia Corp, the Philippine's biggest producer has already announced its adherence to the required International Standards, according to Wilson. The company accounts for 40% of the countries nickel production.
The summer season in Europe is typically quiet, with many stainless steel foundries closing for August for care and maintenance, likely to put a damper on demand according to the earlier trader.
"There are lots of hedge funds buying into nickel at the moment, but demand in Europe is very quiet, and with the higher price, demand is going to go lower," the trader said.
Wilson also added he was expecting the high prices for primary nickel to filter through to the scrap market, putting further downward pressure on prices.
A broker said on Tuesday: "Technical buying has defiantly pushed [nickel] prices up, but the macro picture is good globally, equity markets are up, stocks are up, which is helping the base metals."
Further news out of China of monetary stimulus were also providing some ballast to nickel, according to the trader, but all sources agreed the metal had likely overdone its move to the upside. "I expect a big correction, and I think it will be soon," the trader said.
