positive outlook for nickel

Mincor has hedged 35% of nickel production to march 2007 at average $A16,500 per tonne.



Inco: Nickel Market Developments and Outlook
By HS - Webbolt Newsroom
February 15, 2006, 13:36


Chief Executive Officer's Message

The stainless steel inventory adjustments that affected the global nickel market beginning in the second half of 2005 continued into the fourth quarter of 2005. However, we have seen a number of positive signs that these inventory adjustments are now behind us. Nickel demand in non-stainless applications like aerospace and hybrid vehicles remained very strong in the fourth quarter of 2005. On the supply side, we saw production disruptions at several nickel producers in the fourth quarter of 2005, tightening nickel supplies.

As we entered 2006, the nickel market has begun to gain momentum, as reflected in the benchmark LME cash nickel price which has averaged $14,711 per tonne ($6.67 per pound) over the January 3-February 13, 2006 period compared with an average LME cash nickel price of $12,628 per tonne ($5.73 per pound) in the fourth quarter of 2005. We expect that stainless steel production will rebound in 2006, led by large production increases in China as new capacity there comes on stream. Industrial production and capital investment are expected to be strong in the U.S. and to improve in Europe and Japan. We are continuing to see good demand from the U.S. and European high nickel alloys market, fueled by the aerospace and power generation end-use markets for these alloys.

In short, with strong growth in nickel demand forecast for 2006, and with limited new nickel projects or expansions currently expected to come on stream before at least 2008, we believe that nickel demand should continue to outpace supply in 2006, which will continue to put upward pressure on prices.