But hold on, the nickel price rose by 2.1% on 12 October 2015 to US$4.85/lb (and traded as high as US$4.88/lb), in A$ terms that's A$6.59/lb at 0.736US$/A$. A nickel price of US$4.85/lb is about the same as it was in mid-August 2015, while LME nickel stocks have continued to relatively plummet back to the levels they were in early to mid-May 2015, when nickel rose to a recent peak of US$6.50/lb as shown in the Figure.

We all know that the Australian nickel share prices have been gradually increasing with Western Areas (WSA) up from its 30 Sept low of A$2.11 by 36% to close on 12 October 2015 at $2.87, with in the same period Independence (IGO) up 41% to $3.57, Mincor (MCR) up 26% to 29c and Panoramic (PAN) up by 28% to 36.5c.

In mid-August 2015, WSA was ~A$2.83, IGO was ~$3.38, MCR was 33c and PAN was ~36.5c. Showing the correlation that the nickel shares appear to have with the US$/lb nickel price.

However, compared to the early to mid-May peaks should nickel prices recover based on the level of LME nickel stocks, then : WSA was 37% higher at $3.93, IGO was 68% higher at ~$6.00, MCR was 117% higher at 63c and PAN was 59% higher at 58c. And that is just the prices then, when the A$ had risen from ~76USc to about 80USc

Are there any other indicators ?. We/ERA have often remarked that despite all this doom and gloom, China has not been that oversupplied that it has refused any ore or cons shipments and sent them back, and that includes iron ore. In fact it continues to take anything sent to it and has been reaping the benefits of lower commodity prices against a relatively strong Chinese Yuan currency.

And then there are the mega commodity producers. Let's face it, based on observation, many mega producers have a track record of buying assets at the top of a market and selling at the bottom. Northern Star has scored big-time from its gold mine acquisitions of Kanowna Belle, Jundee,  Kundana, Plutonic etc recouping its acquisition costs of each operation in less than a year and extending mine lives on all of them.

Jake Klein in his Diggers presentation stated "we should not have been allowed to get it (Cowal)". But did and look at us now ! (Evolution's potential growth to ~800kozpa with Cowal, Mungari and a very profitable Edna May, etc). Gold Fields have been talking up their purchases of Wallaby and continued depth and new lateral extensions there, and the impact on recoveries that installing a gravity circuit (why wasn't it done earlier?) that has occurred at the aging Granny Smith plant.

Even Zijin who missed out on some of the Barrick gold mine sales after discovering that Barrick wanted cash and did not want Norton (NGF) paper, then paid almost US$300m in cash for 49.5% of Barrick's ~500kozpa Porgera mine in PNG in May 2015, and has been widely rumoured to take over the Kalgoorlie Super Pit and cement its position in Kalgoorlie. Zijin also bought some copper mine assets in the DRC from Ivanhoe at the same time.

While in the SMH (Sydney Morning Herald) today (13 October 2015), it was reported that Glencore has started a process to sell two copper mine producing assets being its Cobar copper mine in NSW and its Lomas Bayas copper mine in Chile.

We/ERA can recall attending a conference in Beijing late in 2015, in which the question was asked why was MMG supported by China's banks to buy the mega Las Bambas operation in Peru. To which the reply was that it was "based on future higher commodity prices".

So has the base metal cycle restarted ?. The base metal price cycle has historically been nickel, then copper, then zinc. The logic was there for nickel to recover once the iron ore prices started recovering, as China stated at the China Mining Conference in Tianjin in October 2014, that any additional iron ore imports above its (peak) imports for domestic consumption, is used to produce export steel.

Why did commodities get so weak. Quite simply traders feeding on the gloom sentiment of a slowing China, and they appear to have overdone it, with China scoring big time paying for its growth and acquisitions in 2015 based on even lower commodity prices. And now the traders may buy the positions back again.

We/ERA have also often remarked that possibly up to an extra 1% of China's GDP could be export GDP due to the construction projects that China has in the world. Such as that recently (~June 2015) completed new electric railway line and rolling stock in Ethiopia over 752km from Djibouti to Addis Ababa using a workforce mix of Chinese and local Ethiopians. China also has a new railway line that is under construction in Tanzania.

However, if commodity prices rise/recover, then the A$ is probably going to rise too, and cushion some of the increase. Such that the forecast fall to US60c may not then occur. The A$ has usually behaved as a commodity currency (rising and falling with commodity prices) despite economic forecasts.

With the nickel price picking up, it appears that nickel may have bottomed and is recovering, and could be leading another base metal cycle.

 Disclosure and Disclaimer : This article has been written by Keith Goode, the Managing Director of Eagle Research Advisory Pty Ltd, (an independent research company) who is a Financial Services Representative with Taylor Collison Ltd.

 Figure: Nickel Price and LME Nickel Stocks in the Past 6 months (Source: www.kitco.com )