bought at open, page-3

No Ni Bubble imho.. Just high demand and not much ni stock around!



Commodity Strategists: Nickel to Rise on China Demand (Update1)

July 10 (Bloomberg) -- Nickel prices will rise as demand, led by surging production of stainless steel in China, will exceed supply, Beijing Antaike Information Development Co. said.

Cash prices may average $17,000 a metric ton this year compared with 2005's $14,768 on the London Metal Exchange, Antaike analyst Xu Aidong said in a July 7 interview. The forecast is 21 percent more than Xu's April call of $14,000.

Nickel, which is used to rust-proof stainless steel, has surged to the highest in at least 19 years amid economic growth in the world's leading economies. The Organization for Economic Cooperation and Development said May 23 that growth among its 30 members would be 3.1 percent this year, compared with an earlier forecast of 2.9 percent. China's economy has doubled in size over the past decade, overtaking the U.K. and France.

``Nickel demand in China, the U.S. and Europe is stronger than our previous forecast because of sound economic growth,'' said Xu, who's been tracking the market since 1996. Antaike, a research affiliate of the China Nonferrous Metals Industry Association, advises the Chinese government on industry policies.

Three-month nickel futures prices on the LME, the world's largest metals bourse, have averaged $17,438 a ton from the end of last year to July 7. The contract, traded as high as $24,100 a ton at the end of last week, has gained 77 percent this year.

Chinese stainless steel production will rise more than 25 percent to 4.7 million tons this year, boosting demand for nickel by 35,000 tons, or half the projected increase in global demand, Xu said. Global nickel use may rise to 1.33 million tons this year from 1.26 million tons last year, she said.

Record Production

Stainless steel production worldwide climbed 0.3 percent to a record 6.6 million metric tons in the first quarter from a year earlier, the Brussels-based International Stainless Steel Forum said on July 6.

``Inventories are being depleted and mine disruptions are tightening supplies,'' Xu said by phone from Beijing.

PT Aneka Tambang, an Indonesian nickel miner, said on July 5 its new smelter will be shut down for three months for repairs, curbing annual production by between 3,000 tons and 6,000 tons.

PT International Nickel Indonesia, the country's biggest maker of the metal, may lose as much as 8 million pounds, or 3,629 tons, of output this year after a fire damaged a transformer at one of its furnaces, it said on July 5.

Slumping Stockpiles

Nickel stockpiles monitored by the LME stood at 9,378 tons July 7, down 74 percent since the beginning of the year.

Still, Xu said prices will stabilize and may fall slightly in the fourth quarter as some Chinese home-appliance makers and users are reluctant to buy because they can't afford the higher nickel costs passed onto them by steelmakers.

``Even though demand in U.S. and Europe will remain robust in the second half, further rises in nickel prices may slow stainless steel production in China, thus hurting nickel demand,'' Xu said.

South Korea's Posco and the other two biggest stainless steel producers in China began cutting supplies of cold-rolled steel from July 1, in part to avoid rising nickel costs.

Baoshan Iron & Steel Co. is switching some production to steel that has a lower nickel content to reduce costs, Wang Chengxue, assistant to president at the stainless steel unit said on July 5.