http://www.theaustralian.news.com.au/business/story/0,28124,26025...

http://www.theaustralian.news.com.au/business/story/0,28124,26025666-5005200,00.html

THE nickel price has been tipped to rise by about nine per cent next year amid signs of recovery in China's stainless steel market.

"Nickel demand and production in 2009 decreased 20 per cent and we're expecting a rebound of about nine per cent in 2010,'' Minara Resources chief executive Peter Johnston told a business function in Perth today.

The nickel price is now about $US18,300, which compares to a high of about $US55,000 a tonne at the height of China's steel-making boom in 2007 and a 2008 low of $US8,900 as it curtailed steel production.

Mr Johnston said the dip was "aberrant'' and unlikely to be repeated.

"I didn't think it would last,'' he said.

However, London Metals Exchange nickel stockpiles are currently at the highest levels since they began being recorded in 1990, which indicated nickel price volatility was set to continue in the short term.

Mr Johnston said China's nickel consumption was "showing sign of recovery'' but a rebound in Europe and the US was needed also.

"Europe worries me - its very soft,'' he said.

"Japan is also extraordinarily soft. There are some signs east Asia and the US might be improving. If its just a China story, the industry will remain vulnerable.''

He also said any nickel miner who believed they could develop a processing plant for laterites - the most technically challenging variety of nickel - for less than $4 billion was kidding themselves.

The vast majority of the world's nickel - 70 per cent - resides in laterite ores.

"I would suggest with BHP's experience with Ravensthorpe (in WA) and particularly Vales' experience with Goro (in New Caledonia), you would need about $4 billion to start a nickel laterite plant,'' he said.

"Anyone who think they can do it cheaper is mistaken and I've got the scars to prove it.''

Minara, formerly the Andrew Forrest-chaired Anaconda Nickel, endured many years of problems processing laterites at its Murrin Murrin project in Western Australia.