View Full Version : Are Skyrocketing nickel prices predicting war with China?

Ardent Listener
17th March 2007, 21:04

Are skyrocketing nickel prices predicting war with China?

By Alec Nevalainen
Published March 17, 2007

The price of nickel closed at $22.3394/lb on Friday March 16, an all-time high. In one year, the price has risen 337%. Nothing is normal about this parabolic price action.

The recent price surge is strange because many in the mainstream financial community are forecasting a commodity price correction or at least a mild recession later this year. We're also in the middle of a confirmed housing/construction slowdown and you have to wonder why the base metals aren't trending lower instead of setting all-time highs.

Perhaps the U.S. economy has lost enough relevance and a regional slowdown means little to global demand. Or maybe base metal stockpiles are still too low, and mine supply can't raise enough production to meet even marginal demand.

Those are plausible explanations, but the markets could be telling us something else.

Nickel's primary use (65%) is in the manufacturing of stainless steel, with a further 20% of nickel consumption being used to produce other steel and non-ferrous alloys, including super alloys which are used primarily in military aerospace applications. [ 1 ]

More important, nickel is absolutely critical to fight a sustained war. Nickel-plated armor for tanks and vehicles, super alloys for new military aircraft, and stainless steel for everything else including submarines and other traditional weapons. The best example of nickel's wartime value is when the U.S. changed the composition of the five-cent coin from copper-nickel to a mixture of silver, copper, and manganese during World War II.

China's appetite for nickel is not a secret. But the more intriguing question is what percentage of nickel demand is meant for infrastructure development versus military capability? Its rising buildup even prompted the U.S. Administration to openly question why its ongoing military expansion is necessary.

Am I suggesting China is preparing to declare war against the U.S.? No, of course not. We're already at war with China and they seemingly control both sides of the chess board.

The industrial capability required to fight a sustained war are being gleefully dismantled and shipped to China in the name of rising corporate profits. The world's natural resources are being bought and contractually committed to the Chinese economy/military. We're also shipping barges of scrap metal (from our infrastructure) to their ports because they're paying premiums over the spot price. To top it off, China owns over a trillion dollars in U.S. treasury debt. Do you really think all of this is innocent?

The argument that China has too much to lose if U.S. markets suffer has little merit. This isn't about the success of the Chinese people, but the megalomania of its communist leadership. I believe China's agenda and ambition are strikingly similar to the neoconservative goal to reshape the Middle East (with similar regard to human life), but with more patience and calculation.

But why is the U.S. willingly handing the keys of the nation over to China? It's due to the naive belief in orderly free markets, capitalism, and global stability in every context. They're using our greed for "paper profits" to their advantage and will likely change the rules when it suits their interests.

The fact that the U.S. military is bogged down in Afghanistan/Iraq and becoming weaker is emboldening our real enemies: China (and Russia). Cave dwellers with a bank account and the Iraqi people are nuisances compared to the capability of our true enemies. If Iran enters the picture, it's unclear how the U.S. can come away without being exponentially weaker against larger threats. The only problem is that the U.S. is too occupied to recognize the larger threat. China and Russia are becoming stronger, the U.S. is becoming weaker.

The price of nickel is an example of China's appetite and relentless acquisition of natural resources around the world. Its military buildup is not benign, and the ability to defend ourselves is voluntarily waning.

China's plan for dominance seems to be in full swing. In the end, we won't have the industrial capacity or natural resources to adequately defend ourselves in a sustained world war... and this is not by accident.

Alec Nevalainen
Email: nevalainen@gmail.com
Web: www.coinflation.com