China's nickel prices are likely to continue their downtrend due...

China's nickel prices are likely to continue their downtrend due to slight oversupply, but the slide will be limited by high production costs, industry insiders told Interfax today.


"China's nickel prices will continue to fall due to slight oversupply pressure, which could be due to the influx of nickel imports from the decline in LME nickel prices. The average domestic nickel price will likely stand at approximately RMB 200,000 ($28,815.12) per ton this year," Xu Aidong, an analyst with Beijing Antaike Information, said.


Xu forecast that the average London Metal Exchange spot nickel price will stand at approximately $25,000 per ton this year, down from last year's $36,000 per ton, while John P. Barkas with Metalytics Pty Ltd.
said the three-month LME nickel price may dip to $21,385 per ton by 2010.


"Nickel prices have been falling since the end of 2007, which is mainly attributable to increasing nickel pig iron supplies and growing nickel production capacity. However, the plunge in nickel prices from more than $50,000 per ton to about $23,000 per ton has already made many high-cost nickel pig iron producers halt production in China, which may give some support to the prices," Zhong Yongqi, general manager of Shaanxi Energy Metals and Mining Resources Co. Ltd., said.


Nickel pig iron, an innovative response to China's 2005 nickel shortage, will continue to play a role in the industry. Without nickel pig iron production, which is more than 80,000 tons per year, nickel prices will return to around $50,000 per ton and $100,000 per ton, said Stephen Barnett, president of the Nickel Institute.


Compared with acid leaching of laterite ore and refined nickel from sulfite ore, the processing of nickel pig iron from laterite ore in China is the most expensive, due to the surging coke, electricity, freight rates and environmental restrictions.


An industry insider, who wished to remain anonymous, told Interfax that overseas ferronickel producers can reduce costs to as low as $5,500 per ton of nickel as they have large furnaces, high energy efficiency, and no ore import costs. In comparison, Chinese nickel pig iron producers are operating at costs of about $22,000 per ton of nickel, which is when nickel pig iron starts becoming competitive with ferronickel and refined nickel.


"China's nickel pig iron output is estimated to reach 110,000 tons this year, up 15.79 percent from last year, while refined nickel imports are expected to reach 120,000 tons in 2008, compared with less than 100,000 tons in 2007," Chong Dahai, an analyst with Xinhua news agency, told Interfax.


"Meanwhile, China's demand for nickel is estimated to grow 20 percent from last year's 335,000 tons to approximately 402,000 tons this year, due to increased production of 300 series stainless steel," Chong said.


However, Chong also mentioned that China's stainless steel makers are now faced with near-saturation of the domestic market and a possible slowdown in exports with anti-dumping issues emerging in Europe. He estimates that China's stainless steel output will increase 8.97 percent from 2007 to reach 8.5 million tons this year.


Moreover, stainless steel mills are reported to have cut their production by another 30 percent, due to difficulty in obtaining credit loans and high chrome ore prices, Zhong said.


"Judging from the smooth sales of nickel in May, it is hard to say whether stainless steel mills really reduced their production," Xu said.


The spot nickel price stood at between RMB 196,000 ($28,238.82) and RMB 204,000 ($29,391.42) per ton on the Yangtze River Nonferrous Metal Spot Market last Friday, down 9.5 percent from the previous Friday, while the three-month LME nickel price closed at $22,900 per ton yesterday, down 1.93 percent from the previous trading day.


THE PIGS MAY HAVE HAD THEIR DAY!?.

CREDIT