Nickel prices are expected to plunge well into 2009
Analysts see too much supply chasing too few orders
By Tom Stundza -- Purchasing, 10/29/2008 12:00:00 PM
Nickel prices have plunged almost 60% this year, as slowing global economic growth has cut demand for the alloying mineral from producers of stainless steels and other specialty metals. With no purchasing pickup in sight, analysts polled by Purchasing.com suggest that the world price for nickel cathode will cost an average $10.50/lb this year, compared with $17.38 last year. Next year, the new consensus average now sees the price averaging $6/lb.
Royal Bank of Scotland research this month puts world finished nickel production at 1.43 million metric tons last year and forecast a fall to 1.41 million metric tons in 2008. RBS analysts add that consumption was 1.3 million metric tons last year and forecasts it will be 1.4 million this year — an implied surplus of 97,000 metric tons in 2007 moving to 15,000 metric tons this year.
But,Stephen Williams, marketing director for stainless steel materials at BHP Billiton, tells the Australian press that the nickel surplus could reach 22.7 million tons this year and rise to 47.4 million metric tons next year. BHP is the world's third largest nickel producer after Russia's Norilsk and Brazil's Vale. While markets are difficult now, urbanization in China will help maintain robust long-term demand for stainless steel and nickel, according to a Bloomberg News Service report on Williams’ presentation at the Australian Stock Exchange.
Scotiabank economist Patricia Mohr notes in a commodities report today that London Metal Exchange (LME) nickel prices--now under $5.30/lb--have retreated to breakeven costs including depreciation and interest expense. Current nickel prices are below break-even level for some miners. Average production costs are estimated at about $5/lb as an industry average--and as high $6.80 for the highest cost producers. Since it now is estimated that some 40% of the nickel mining and smelting industry may be losing money.
“While we expect nickel prices to rally back in the first half of 2009, as Asian stainless steel production ramps up again, new mine expansion...together with a global slowdown in capital spending in many industries, will likely keep full-year prices low,” she predicts. Her view is most bearish of the analysts polled at $4.45 next year. Reason: New mine expansion at Goro in New Caledonia and Onça Puma in Brazil, together with a global slowdown in capital spending in many industries, “will likely keep supply high and prices low.”
Like what you see?
This news item came from our Price + Supply Alert e-newsletter. If you would like to subscribe to this free weekly e-newsletter, CLICK HERE.
Now Playing: 