Nickel may moderate soon
By Tom Stundza -- Purchasing, 11/1/2006 6:57:00 AM
The nickel market has been tight in the second half of 2006 because of vigorous stainless steel capacity additions in China and significant nickel production losses, according to analyst Jon Bergtheil at the J.P. Morgan Securities offices in London. Inventories have dropped from 35,742 metric tons in January to 6,834 metric tons in late October. So, the average annual price of $10.20/lb through last week compares with a previous six-year price average (2000-2005) of $4.59/lb.
Bergtheil suggests that “investors have a passion for the metal at the moment,” which has kept prices high. However, like almost everybody else, he sees seasonal slippage ahead. That’s why he projects a full-year world price average of $9.52/lb for 2006. And, looking at 2007, Bergtheil sees the average annual price dropping to $6.80. Nickel production growth is expected to increase 5.9% in 2007 versus demand growth of 5%, creating a small price-depressing surplus. Also, sustained high prices for nickel through 2007 will exert downward pressure on the direct demand for the metal in 2008 and beyond, he says, with use of nickel per metric ton of stainless steel anticipated to decline. At that time, he also says “actual stainless steel demand will face consumer resistance in favor of alternative metals.” Still, not everyone agrees with lower prices ahead. Kerry Harmanis, chairman of Jubilee Mines, expects prices for nickel to be strong in the years ahead, on the back of demand from China and India that will keep supply tight. "Personally, I am a strong believer in the China story, with India and other economies to follow, such that, despite volatility, we will see tightness in the nickel market for some years to come, with resultant strong nickel prices," he tells The Age Australian newspaper.
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