Nickel prices could reach an average price of US$10.75 per pound by 2015 according to a Scotiabank commodity market specialist.
Patricia Mohr, a vice-president with the bank, said she expects nickel's steady price increase over the past few months to continue into the new year.
“It's all related to the ban in Indonesia on the export of all nickel-containing ores,” she said.
On Jan. 12, Indonesia, the world's largest nickel producer, banned all exports of nickel-containing ores.
The country's two dominant political parties supported the ban to give local nickel producers time to build processing facilities – with help from Chinese investments.
“The ore was essentially being dug out of the ground and shipped in bulk,” Mohr said. “What they were getting in terms of value-added was very small.”
With 11 processing plants scheduled for construction, Indonesia will be able to sell processed nickel to China at a higher rate of return than its unprocessed ore.
In the meantime – and it could take years before the processing plants are up and running – the ban has driven Chinese buyers to search elsewhere for nickel, and has driven up prices.
At the start of the year, nickel prices were just over $6 per pound, but they surpassed $9 a pound in May.
On July 22, the price of nickel reached $8.61 per pound.
Without the Indonesian ban, Mohr said nickel prices would have stagnated.
“Although stainless steel demand is growing, it probably is going to slow in China,” she said.
In the rest of the world, Mohr said demand for stainless steel has been “quite weak.”
Sudbury is also a major producer of copper and platinum group elements, and according to Mohr, both remain lucrative.
The price of copper was $3.19 per pound July 22, still profitable for producers, even though it falls quite short of historical highs.