Nickel prices drop on demand slump
by staff -- Purchasing, 6/13/2007 9:57:00 AM
Nickel prices fell to a three-month low this week on the London Metal Exchange after data showed inventories are building fast on slowing demand. “Prices probably will drop further as supplies grow,” said Andrew Silver, a trader at Natixis Commodity Markets. “Current prices are still too high.”
“Nickel prices have started declining,” said Metropol Group metals analyst Denis Nushtayev in a report on Norilsk.
In a recent Bloomberg report, Sydney- based analysts for Citigroup said nickel prices will probably halve in coming months because of increasing supply and there will be a surplus of 1,000 tons this year and 48,900 tons in 2008, the bank forecast. Supply lagged behind demand by 14,100 tons last year and average prices reflected it. Norilsk Nickel, the world’s largest nickel supplier, said recently its average nickel prices were $24,081/metric ton in 2006, up a whopping 65% from 2005.
But the outlook may show a different picture as nickel producers ramp up production and mergers consolidate capacity. Mining giant CVRD said recently it will double its nickel output in the next five years based primarily on organic growth, but also through acquisitions. CVRD last year bought Canadian nickel mining firm Inco. More recently impacting the nickel market is the proposed acquisition of Canadian firm LionOre by Norilsk, which is currently receiving approvals.
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