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Nickel price fall’s not yet a bait
26 Jul, 2007, 0440 hrs IST, REUTERS

LONDON: Nickel users will shrug off the sharp fall in prices and wait till the fourth quarter to step up their purchases as alloy surcharges remain high. The price of nickel, a key ingredient of stainless steel, has fallen by nearly 40% over the past two months, since hitting an all-time high of $51,800 in early May. But alloy surcharges, which stainless steel producers charge customers to recoup the cost of the raw materials they buy, have not fallen so quickly as they generally take into account average input costs from two to three months.

“We see some pushback from customers because they do not want to absorb any more metal with a high surcharge attached,” said David Humphreys, chief economist at Russia’s Norilsk Nickel. Nickel for three-months delivery on the London Metal Exchange was quoted at $31,780 on Wednesday.

Cutbacks from stainless steel producers such as Finland’s Outokumpu and Korea’s Posco have weighed on prices, triggering speculative funds to bail out of the market. “The alloy surcharges will come off at some stage, probably like September or October and that’s simply what people are waiting for,” said analyst Michael Widmer at Calyon.

The base price for stainless steel in Europe fell in June to $1,685 a tonne from around $1,800 in April as demand for stainless steel has weakened, Widmer said.

But the surcharge rose to $4,275 in June from $3,968 in May. Analysts say the dip in demand for nickel is likely to be only a temporary blip.