nickel prices to fall

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Nickel Prices to Fall as Steelmakers Cut Purchases (Update1)

By Debarati Roy

July 22 (Bloomberg) -- Nickel prices may average as much as 46 percent lower this year as steelmakers increased production of low-nickel content products, said Jindal Stainless Ltd., India's largest stainless steel producer.

Nickel will average between $20,000 and $25,000 a metric ton this year compared with an average $37,089 a ton last year, said Arvind Parakh, a director at the New Delhi-based company.

The metal is headed for a second straight annual drop, after last year's 21 percent decline as stainless-steel mills resorted to products containing less nickel. The use of nickel in making stainless steel may fall 9.5 percent this year, metals research firm Heinz H. Pariser said July 9.

``Stainless steel customers are holding back their purchases to watch if prices will fall further,'' Parakh said in a phone interview in New Delhi today. The share of low-nickel-content stainless steel has increased to 37 percent of the total output for the alloy, up from 25 percent three years ago, Parakh said.

Last year, global nickel production was 1.43 million tons, compared with demand of 1.33 million tons, said Adam Rowley, an analyst at Macquarie Group Ltd. in London. China accounts for a quarter of the global demand, he said.

``This year there will be a slight oversupply'' at 1.45 million tons compared with an expected demand of 1.44 million tons, he said.

Goldman Sachs Group Inc. reduced its nickel forecasts for this year through 2010 because of surplus supply. Prices will average $24,522 this year, 15 percent less than the previous estimate, the bank's analysts said in a report published last month. They cut the 2009 forecast by 34 percent.

Nickel for three-month delivery on the London Metal Exchange traded at $20,600 a ton, up 0.3 percent, at 4:35 p.m. India time.

To contact the reporter on this story: Debarati Roy in Mumbai at [email protected].