Good afternoon
economic numbers over the last few days had few surprises…The market is anxiously awaiting FED-comments tonight, trying to get a clue why the bond market is so volatile, what might be behind it, and whether the FED will adress the issue. The labor market in the States is still very subdued, which will give investors some comfort into the interest rate enviroment in the immidiate future. But the volatility , and general positioning by investors in different sectors, are making me think, that this time, the multi-year trend for interest rates to fall might have come to an end??? We have been fearing that before , I know - perhaps this is another storm in the tea-cup? Hmmm…one day it has to happen, and that day might have been a few weeks ago!
Interesting equity markets today! looked pretty weak, once again , this morning - but with the open in the US, they turned around to be stronger now - led again by the DOW Jones, with NASDAQ also up a little. But an hour into trading, Wall Street looks sick again! And another hour later, it´s just green ! What a day…Let´s hope, that Powell will calm the markets later! The better news comes from the bond market today, which has recovered somewhat, especially in Europe, from yesterday´s losses.
Oil is strong backed by some Saudi Arabian comments , to not increase production to soon.
The big story for me as a resources investor is the news, that Tiangshan , the world´s largest stainless steel producer, is planning to produce battery-nickel from indonesian plants. And not only this - they are targeting a near doubling of nickel production over the next 5 years! That would not only nad news for the nickel price, but also replace some nickel production from sulphides ( as largely happening in Australia, for example ). The nickel prices has tanked from a high of 20.000 US$/t on the 25th of Feb, to 18700 US$ on the 3rd of March, to a low of 16.000 US$ today!!! It´s recovering now - trading at 16510 US$t currently.
A few comments:
it remains to be seen, whether Tiangshan actually will be able to deliver on it´s plans on a large scale. It also remains to be seen, whether this material is suitable for western automotive companies, as I believe, that Indonesian production of nickel is very energy-intensive, and enviromentally damaging . And lastly, it remains to be seen, at what price they can produce. Previous comments indicated, that they need a nickel price sort opf 8$/lb or 17.600 US$ to justify the investment. Macquarie believe, that this price could well be lower.
I think we will not find out for a while - but this issue will continue to overhang the market in nickel for some time, I think. Most nickel producers can make money at 16.000 - but the recent 20.000 US$/t certainly was much nicer. We might not see this price level again for some time…But Tianshan´s plans will also destroy some nickel production in China, and might make it very hard for completely new projects to get of the ground, therefore limiting supply from elsewhere.
Strike Energy / Warrego - Strike announced, that the next intermediate target of their current well at 3906m has been reached. Hydrocarbon shows have bene recorded throughou the latest section. This is good news, as this could mean oil - but in any case, the company comments, that these occurences are supportive of Strike´s models, and are analogous to what tehy saw at the extremely succesfull West Erregulla 2 well. This could be fun! The main two gas zones will be drilled shortly- everything so far points to final results in March. Once again - exciting times for Strike. If succesfull, the stock will be valued a few ct higher ( one broker indicated 44ct/share today ) - if they can deliver a serious JV-partner for the urea-project, higher again - and if they should be successfull with exploration on their adjacent, 100% owned acreage, potentially quite a bit higher. At this point, it´s definitely worth holding Strike! Another 800-900m to go for the well! Gas markets are looking good in Western Australia as well for many years to come!
Have a nice evening