This Is the Ideal Time for BHP Billiton Ltd to Offload Its Nickel Assets

Nickel prices have surged this year due to Indonesia's export ban, which has raised supply concerns. The nickel market, which has been oversupplied over the last few years, is now expected to go into a deficit. Not surprisingly, the outlook for nickel prices is robust. Strong nickel prices will help the likes of Vale (NYSE: VALE  ) and Norilsk Nickel (NASDAQOTH: NILSY  ) . They will also help BHP Billiton (NYSE: BHP  ) , which is looking to offload its nickel assets.

Surging nickel prices
After crossing $20,000 a ton, nickel prices surged to over $21,000 a ton last week amid concerns over supply due to Indonesia's export ban. Indonesia, which accounts for over a quarter of the world's production of nickel, banned exports of nickel ore grading less than 4% nickel earlier this year. The move has completely changed the fundamentals of the nickel market, which was oversupplied until last year. It has also sparked a huge rally in nickel prices.

While nickel prices saw a pullback last week after surging above $21,000 a ton, prices are still up sharply for the year. More importantly, prices are expected to further strengthen as Indonesia has not shown any intention of lifting the ban on exports.

On Tuesday, the world's largest producer of nickel, Norilsk Nickel said that the global nickel market will swing to a deficit next year. The Russian company said that the global nickel surplus will fall to a four-year low this year before swinging to a deficit in 2015. According to Macquarie, demand will exceed output through 2019.

Not surprisingly, the outlook for nickel prices is robust. Macquarie recently raised its price outlook for nickel for 2014 by 25% to $19,911 a ton. The bank notes that prices could nearly double by 2019. Deutsche Bank is also bullish on nickel as it recently raised its 2015 price target for the metal by 21% to $20,625 a ton. Deutsche Bank expects prices to hit $27,000 a ton by 2017.

The surge in nickel prices would be welcome news for miners such as Vale and BHP Billiton, albeit for different reasons. While strong nickel prices will help Vale in offsetting some of the weakness in the iron ore market, for BHP Billiton robust prices mean it will be easier for the company to offload its nickel assets.

BHP reviewing options for Nickel West business
BHP Billiton has said in the past that it wants to focus on its core business, which includes iron ore, copper, petroleum, coal, and possibly potash. BHP has already exited a number of non-core businesses, and earlier this month, the company said that was reviewing options for its Nickel West business. This doesn't come as a surprise as the surge in nickel prices has made it an ideal time for the company to offload its nickel assets.

BHP's Western Australian Nickel West business includes three mines: the Mt. Keith, Cliffs, and Leinster. The business also includes the Kalgoorlie smelter, Kambalda concentrator, and the Kwinana refinery. The company said that it is considering all options for Nickel West, including a possible sale. According to analysts at Investec, the business could fetch the Australian miner as much as $700 million. Given the robust outlook for nickel prices, the company is likely to see significant interest in its nickel business. The mining sector is seeing interest from private equity firms. In addition, there are mining ventures such as X2 Resources that have been created to invest in the metals and mining sector. 

3 stock picks to ride America's energy bonanza
Record oil and natural gas production is revolutionizing the United States' energy position. Finding the right plays while historic amounts of capital expenditures are flooding the industry will pad your investment nest egg. For this reason, the Motley Fool is offering a look at three energy companies using a small IRS "loophole" to help line investor pockets. Learn this strategy, and the energy companies taking advantage, in our special report "The IRS Is Daring You To Make This Energy Investment." Don't miss out on this timely opportunity; click here to access your report -- it's absolutely free. 

  


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2967186, ~/Articles/ArticleHandler.aspx, 11/25/2014 7:39:11 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 17,814.94 -2.96 -0.02%
S&P 500 2,067.03 -2.38 -0.12%
NASD 4,758.25 3.36 0.07%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

11/25/2014 4:00 PM
BHP $55.19 Down -0.89 -1.59%
BHP Billiton Limit… CAPS Rating: ***
NILSY $18.34 Down -0.34 -1.82%
JSC MMC Norilsk Ni… CAPS Rating: ****
VALE $9.40 Up +0.04 +0.43%
Companhia Vale Ads CAPS Rating: ****

Advertisement