Slight nickel price increase is expected to dissipate soon
With stainless steel production down, nickel is about to fall again
By Tom Stundza -- Purchasing, 1/14/2009 2:01:00 PM
The world price of nickel is averaging $5.44/lb so far this month, up from $4.39 in December but analysts expect the full January average price to fall back around $4.88. Looking ahead, three-month futures prices are trading around $4.63. That’s because supply/demand fundamentals won’t support a run up in nickel prices, according to analysts, even though prices are far below the $6.80 global marginal cost of production.
Production of stainless steel, accounting for 65% of nickel demand, will fall for a third year in 2009 as demand continues to be weak, according to a forecast by CRU, as reported by Bloomberg. World stainless production had been expected to increase 6% to 29.3 million metric tons in 2008, according to the International Stainless Steel Forum,until the global economic slowdown short-circuited demand. So, global stainless steel output instead dropped 7% to 26.6 million metric tons last year, and probably will fall by at least another 1% this year, says the London-based CRU metals consultancy.
Thus, nickel's early-January price bounce had nothing to do with an increase in demand but probably reflected the recent production cuts by a number of nickel smelters and refiners around the world, suggests John Mothersole in the Washington office of IHS Global Insight. “Stainless mills have really cut production and that's what's been driving down nickel prices quite clearly,” says Mothersole. Analyst Max Layton at the Macquarie Group’s London office also says in a new report that lower than expected stainless steel production in 2009 will cut nickel output to 1.33 million metric tons from 1.36 million in 2008.
The American Metal Market subscription newspaper says that some service center sales executives are trying to boost market sales of stainless this quarter through aggressive marketing that is citing December’s low transaction prices--with cold-rolled sheet at a 28-month low of $3,040/ton (with alloy surcharges). One sales manager is quoted as saying that “stainless is probably priced as low as it's going to be for a while, so if you have projects you've put off because of high material costs, now is the time to do them.”
Big drop seen in nickel prices for 2008
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