Continuing demand, lower quality Ni and PON floor courtesy of...

Continuing demand, lower quality Ni and PON floor courtesy of NiPIG...Im glad Im with a producer who will make hay while the sunshines for the ST to MT!

Costly pig iron key to nickel supplyReuters, Friday March
28 2008 By Humeyra Pamuk
LONDON, March 28 (Reuters) - Delays to nickel mines around the world will force big industrial consumers like stainless steel makers to rely on low grade nickel pig iron for years.
Analysts said nickel pig iron, a lower grade nickel which has become a key supply source for the stainless steel sector will continue to play a big role for the foreseeable future.
"It is essentially a stop-gap measure," said David Humphreys, chief economist at Norilsk Nickel, the world's biggest producer of the metal. "Having said that, the measure will be around for quite a time to come."
"Certainly for the moment, it is required in the market."
Chinese pig iron production exploded last year as small steel and ferro-alloy makers in China switched to producing the alloy to escape a clampdown on small-scale producers and to take advantage of record high nickel prices.
Nickel pig iron output is estimated to have risen to around 100,000 tonnes in 2007, from about 30,000 tonnes a year earlier.
BHP Billiton said it had declared force majeure on nickel deliveries from its Cerro Matoso mine in Colombia, which produces nearly 4 percent of the world's nickel, But high costs will eventually lead to its disappearance as new mine output starts to come on stream.
"With the prospect of significant growth in new capacity over the next few years, some of that pig iron production could get pushed off the cost curve because it is very high cost," Humphreys said.
Brazilian Vale's long-delayed Goro project in New Caledonia is expected to start up in late October this year, but will still take 3-1/2 years to reach full capacity of 60,000 tonnes per year (tpy).
London-listed European Nickel's Caldag project is still awaiting a forestry permit while BHP Billiton's Ravensthorpe nickel project is expected to start up this year.
HIGH COSTS
Macquarie Bank sees 2008 global nickel supply up 4.3 percent to 1.5 million tonnes with pig iron output at 110,000 tonnes.
The market will post a small surplus of 7,000 tonnes against 60,000 tonnes in 2007.
"A very tight market is on paper to 2010," analyst Jim Lennon at Macquarie Bank said.
"Over the next five years, nickel pig iron is going to be around plugging the gap, but eventually it will be replaced by much lower cost material."
The cost of producing nickel pig iron varies between $8-16 per pound, depending on the nickel grades while the cost of conventional nickel production could go up to $8 per pound.
Record high coking coal and energy costs means nickel prices must remain firm to make pig iron production feasible.
"You've got a segment of that nickel pig iron production which needs over $30,000 per tonne nickel price," Lennon said.
Nickel for three-months delivery on the London Metal Exchange traded at $31,700 per tonne on Friday, having risen to a year-high of $35,150 per tonne in early March, way below its all-time peak of $51,800 per tonne last May.
Around 60 percent of nickel output is consumed by demand from stainless steel producers, which use the metal to make steel harder and more resilient to corrosion.
Demand from stainless steel producers has been stagnant since mid-last year after they cut production following the nickel price's record high.
Since then, producers have been destocking -- using their own stocks rather than buying new -- pushing up inventories to around 49,000 tonnes from around 4,000 a year ago.
But analysts are optimistic.
"It is not going to be as impressive as it was in the previous years, as we have somewhat a less robust world economy but the cycle has not gone away," Tony Warwick-Ching, analyst at industry consultants CRU said. (Reporting by Humeyra Pamuk, editing by Elizabeth Piper)