mincor sees nickel price falls persisting

Mincor sees nickel price falls persisting
SYDNEY, Sept 9 (Reuters) - Falling world nickel prices due to a supply glut will persist until more producers cut supplies, the head of Mincor Ltd , Australia's third largest nickel miner, said on Tuesday.

A handful of producers have stopped supplying nickel or deferred expansion plans, so far of little help to prices. London Metal Exchange nickel is down about 30 percent this year to around $18,600 a tonne, two-thirds of its all-time high of $51,800 in May last year.

'We are going to continue for at least another couple of months at these price levels and then the price should shoot upwards as more supply cutbacks are announced and new supplies are not incentivized,' Mincor Managing Director David

Moore told Reuters in an interview.

'There is a lot of pressure on the higher cost producers at this point, Moore said.

Xstrata Plc in August suspended mining at its Falcondo operation in the Dominican Republic, effectively removing 10,000 tonnes, or less

than 1 percent, from the world supply pool.

Australia's biggest producer, BHP Billiton Ltd ,idled its Kalgoorlie nickel smelter and Kwinana refinery in June for four months of repair work, while Minara Resources Ltd deferred a nickel expansion plan due to high costs.

Merrill Lynch said in a recent report it expected more miners to cut back or to defer projects even though many were already close to the marginal cost of production.

Mincor plans to maintain output at between 19,500 and 20,500 tonnes in the 2008/09 financial year, switching its focus away from increasing production to control over margins, Moore said.

Moore predicted the next round of cuts will come from miners of nickel laterite ore, which Mincor does not mine, where cost pressures are greatest.

'Seventy percent of the world's resources of nickel is tied up in laterite and all that laterite needs things such as sulphur for processing and sulphur has gone through the roof -- from $150 a tonne three years ago to $800 a tonne,' Moore said.

Moore said Mincor cut its own production costs in July by more than 10 percent to under $6.00 per pound of nickel. Its nickel sold for an average price of A$9.53 per pound compared with a current spot of around A$10.25 per pound, he said.

Mincor has a resource of 167,300 tonnes of nickel, up from an earlier figure of 146,300 tonnes, according to Moore.

Lower production in China, which consumes about a fifth of the world's nickel, could also lend price support, he said.

Chinese nickel pig iron producers occupy the top part of the production cost curve and were also hurting, Moore said.

Jinchuan Group Ltd, China's top producer, has cut its production target after delays to a new smelter, a company official told Reuters on Monday [ID:nHKG259751], potentially cutting annual output by 10,000 to 20,000 tonnes from a target of 120,000 tonnes.

($1=A$1.23)