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Nickel the preferred metal: GSJBW -------------------------------------------------------------------------------- Thursday, 2 November 2006 Jesse Riseborough
COMMODITY analysts from Goldman Sachs JBWere have flagged nickel as its preferred base metal, tipping the tight supply market that currently exists to continue through to at least 2008 and to be driven by demand for stainless steel and ongoing supply issues.
"Fundamentally, the story is driven by strong demand for both stainless steel and non-ferrous nickel alloys, which is proving more resilient to high nickel prices than we had feared," GSJBW said.
"Meanwhile, the supply-side landscape for nickel is an increasingly familiar one of delays to projects (some potential; some already very real), and disruptions among incumbent producers."
GSJBW has tipped global stainless steel output to increase by 11% this year as leading producers such as Outokumpu continue to report strong demand.
In terms of the nickel price, GSJBW has predicted rising annual average prices from $US10.57 per pound for this year, through to $10.83/lb next year and $10.95/lb in 2008.
"As far out as 2009, when we forecast a closely balanced market, we believe that the risk remains skewed towards a deficit. Only from 2010 do we see the potential for significant surplus, and we believe that nickel is likely to fall below our long-term price assumption of $5.55/lb only in 2011."
In terms of the ongoing strength of the nickel price on Australian equities, GSJBW flagged further earnings growth for a number of Australian producers, with its preferred pick in the sector being Minara Resources, which recently announced record quarterly production from its Murrin Murrin operation in Western Australia.
MRE Price at posting:
0.0¢ Sentiment: LT Buy Disclosure: Held
(20min delay)