hlare, I would agree on principle. Steel demand is going to be...

hlare, I would agree on principle. Steel demand is going to be the leading indicator of demand picking up in the ferro-metals complex.

However, that said, there are a few exceptions to this rule in all probability. For instance, some metals and additives like V, Nb, Mo, etc, can make steel and iron products more cost effective to use, perform better, and should see growth in uptake even in a flat or oversupplied steel industry.

We shouldn't necessarily confuse and oversupply of iron ore with a lack of demand for the accessory ferrometals. Example, niobium intensity in steel has been increasing 10-30% year on year for a decade. This won't turn around, because it is cheaper to add Nb to steel to get the tensile strength benefits, than just use more steel (even if steel is cheaper). Secondly, if the steel is cheaper then it is easier to sell a specialty steel product even if the accessory metals are still as expensive - the product mix is still going to be cheaper as Fe is still going to be 90-98% of steel.

Therefore...depending on the ferrometal you talk about...a weak steel sector isn't neccessarily going to correlate with lower demand.

In nickel's case, I would expect prices will head up. They have to - BHP is going to lose the entire nickel west operation (mt Keith, Leinster, smelter, Mincor, everything) at Ni = US$9,000/t at this exchange rate. Within months. They cannot make nickel from Mt Keith alone, they need Mincor's ore hence their deal with WSA which bails them out partially. Without sulphides, nothing much will be left. But prices won't get to US$50k/t again, probably high teens, low $20K's.

Vanadium is used mostly in tool steels vs structural steel. The recent death of manufactring in Europe, China, and the USA has seen tool and machinery steel demands evaporate. When manufacturing begins picking up, you'll see vanadium demand pick up. Same as mangancese and chrome.

So, for AXO, the project still makes money right now, but it will need to come onstream at the right time, and mid 2010 is too early. So it will probably get delayed until such times as manufacturing draws down on vanadium stocks and pinches Chengde/Rockcheck.

Thats my view anyway.