Nickel May Surpass $55,000 a Ton This Year, Standard Bank Says...

Nickel May Surpass $55,000 a Ton This Year, Standard Bank Says

By Debarati Roy

April 27 (Bloomberg) -- Nickel prices may surpass this year's record as supplies of the metal used to make steel resistant to corrosion lags behind demand, Standard Bank said.

Nickel may rise above $55,000 a metric ton, exceeding the April 24 peak of $50,200 a ton, Michael Skinner, an analyst at Standard Bank in London, said in an interview yesterday.

Nickel has more than doubled in the past year because of rising demand by Chinese stainless-steel and delays to projects announced by miners including BHP Billiton Ltd. China's output of the alloy used in kitchen sinks may rise 37 percent this year to 7.35 million metric tons, metals research firm Heinz H. Pariser said March 21.

``It is unlikely supply will be able to match demand before 2008,'' Skinner said in Mumbai. ``People will remain bullish in the short and medium term.''

A four-month strike by Eramet SA workers in New Caledonia reduced the company's output by 50 metric tons a day, 27 percent of its 185-ton daily rate, since Sept. 25. The strike ended in January. BHP said Nov. 30 that its Ravensthorpe nickel project in Australia will be delayed by as much as a year as costs rose.

Not everyone's agrees.

Nickel prices may fall in the second half of this year as China may substitute the metal for cheaper ingredients because of a surge in prices, Goldman Sachs JBWere Pty. said.

``We are increasingly concerned that brisk growth in low- grade ferronickel production in China has the potential to return the global nickel market to surplus from 2008,'' Goldman analyst Ian Preston said in a report dated yesterday.

Nickel Substitute

The metal will average $16.82 a pound ($37,081 a ton) this year, according to Goldman. Its forecast ``implies a very sharp price correction over the next few months,'' suggesting a second-half average price of $14.25 a pound. Nickel for delivery in three months gained 0.2 percent to $47,100 a metric tons on the London Metal Exchange, ending three straight days of losses.

China's imports of laterite, a lower grade form of nickel, are forecast to rise more than 59 percent this year to exceed 6 million tons, from 3.77 million tons in 2006, Xu Aidong, analyst with Beijing Antaike Information Co., said last month.

Posco, the world's fourth-largest steelmaker, said April 25 it will increase output of a nickel-free stainless-steel product fivefold by next year amid soaring prices for the metal. The alloy accounts for about a quarter of Posco's sales.

Still, the move by stainless steel makers to use little or no nickel won't immediately curb demand, Skinner said.

``The prices will remain strong since it will be a while before the substitution effect can be felt,'' he said.

To contact the reporter on this story: Debarati Roy in Mumbai at [email protected]
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Nickel bull looks at $25/lb
Some mills market Nickel Light steels

By Tom Stundza
Purchasing
April 27, 2007

The weekly average price of nickel slipped by barely 3¢/lb to $22.71 on Friday despite earlier speculation that makers of stainless steel, the biggest users of the metal, might reduce orders to cut costs. Nickel has risen steadily by 36% since January with the April month-to-date price average on the London Metal Exchange at $22.73 because of surging demand from China, the world's largest user.

With LME nickel inventories at critically low levels and extremely volatile (up 45% since the recent low in early February) the nickel price has exceeded virtually everyone’s expectations—and wiped away earlier estimates of the $16 annual average price. Nickel, used in stainless steel, may surpass this year's record of $50,200 a ton ($22.77) as supplies lag behind demand, Standard Bank analyst Mike Skinner said in an interview this week in Mumbai. The metal price may rise above $55,000 ($24.95), he said.

Posco, the world's fourth-largest steelmaker, said this week it will increase output of a nickel-free stainless- steel product fivefold by next year after the price of the metal rose to a yet-another record high. The South Korean steelmaker says its nickel-free stainless steel at $2,482/ton will cost 47% less than austenitic-grade 300-series stainless steel cold-rolled sheet.

This new steel uses chromium and supports the efforts of stainless steel producers and users struggling to cover costs as the prices of nickel have risen from January’s average of $16.69. The increase has prompted steelmakers to step up the search for alternatives, while mining companies have attempted to locate new sources of supply.

Meanwhile, here in the U.S., some stainless steel producers already are switching to lower-nickel stainless steels such as 201-series High Performance made by Allegheny Ludlum Steel of Pittsburgh. “With nickel prices surging to record highs nearly every week, stainless steel customers have begun to alleviate the sting of higher costs,” analyst Mike Gambardella at J.P. Morgan Securities in New York writes today to clients. He says the Allegheny Ludlum product (AL2003) contains only 3% nickel versus Type 316 stainless that contain 10% nickel “while offering virtually the same structural properties at a much lower price.”