the big picture

Nickel touches fresh high of USD43500 per ton on fears of fast depleting inventories
General News - 2007 February 25
Nickel hit a new high of $43,500 a ton in London in early trade on concerns over its availability for use in stainless steel that consumes about 66 per cent of the metal.

The record rise was mainly attributed to supply fears created by fast depleting inventories.


Nickel prices have climbed about 30 per cent on the London Metal Exchange (LME) so far this year, and there are indications for further upside in the days ahead.


Inventory levels in the LME-registered warehouses are receding fast owing to a lack of fresh additions by producers. However, Offtake continues unabated – 468 ton today moved out knocking the level down to a low of 3,930 ton, equivalent to world’s one-day consumption. With this, stockpiles have plunged 34 per cent since the beginning of the year.


Mumbai’s non-ferrous metals market gained about 10 per cent to Rs 1,910 a kg from Rs 1,740 a kg in the beginning of the year, on the back of a fall in domestic stainless steel producers’ demand for nickel owing to the new trend of manufacturing low-nickel stainless steel. Sector experts said the industry was currently using only 1 per cent of nickel (as content) in stainless steel production against the 6 per cent earlier.


Nickel prices are also soaring on huge demand from China, the world’s largest producer of stainless steel. The prices have jumped over six-fold over the past five years as supplies failed to keep pace with the Chinese demand. The country’s stainless steel production surged 68 per cent in 2006.


In 2006, inventories slumped 85 per cent from 36,000 ton to 5,000 ton, while prices shot up over 170 per cent. The higher nickel prices have also been corroborated by Deutsche Bank forecasts.


As per the report, 2007 will see a supply deficit of 1,98,900 ton, while in 2008 the deficit will be 1,66,800 ton, primarily because of production delays at the two largest mines scheduled to come onstream – BHP Billiton’s Ravensthorpe in Australia and CVRD’s Goro in New Caledonia.


Nickel has outpaced other LME-traded metals owing to stainless steel mills’ capacity expansion and cut in production by leading producers.


Almost all stainless steel mills have expanded their capacities, pushing the demand up.


The world’s largest ferro-nickel smelter, Eramet, cut output at its New Caledonia unit by 27 per cent on account of a strike that lasted for almost four months. Some experts said nickel consumption would beat production by 3,600 ton this year, following a deficit of 23,300 ton in 2006.


On the other hand, the growth in demand for stainless steel is forecast at around 7.5 per cent this year and is likely to push nickel prices to new highs.


In the backdrop of the reduced nickel use pattern, February delivery on the MCX today fell marginally to Rs 1,849 a kg from Rs 1,864 a kg on the previous day.


March delivery too fell 0.87 per cent to Rs 1,809.5 a kg from Rs 1,825 a day earlier. Given the long-term tight supply situation, April delivery gained a marginal 0.54 per cent to Rs 1,783 a kg from Rs 1,774 a kg yesterday.

Source: Business Standard

published in ME Steel News, quoted on Kitco