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Australia Raises Nickel Forecast 48% as Demand Exceeds Supply

By Jesse Riseborough and Tan Hwee Ann

March 6 (Bloomberg) -- Australia's commodity forecaster raised its price forecast for nickel, which soared to a record this month, by 48 percent as a lack of new mines and scarcity of skilled labor means global supply lags behind demand growth.

The price of the metal, used to make stainless steel, may average $36,750 a metric ton, or $16.67 a pound, in 2007, the Australian Bureau of Agricultural and Resource Economics said in its quarterly report. It had previously forecast a price of $24,800 a ton.

Nickel prices have jumped in the past five years as China stepped up stainless steel production, overtaking Japan as the world's largest supplier. New mines by BHP Billiton Ltd. and Cia. Vale do Rio Doce have been delayed, crimping supply growth.

``Prices are expected to average higher in 2007,'' the Canberra-based bureau said today. ``Long lead times in developing new mines, difficulties in sourcing skilled labor and materials, and strong demand continue to contribute to a tight- supply demand situation.''

Nickel cash prices reached a record $45,400 a ton on the London Metal Exchange on March 1. Three-month nickel futures on the world's largest metal bourse reached an all-time high of $42,200 a ton on March 1.

Global nickel stocks for 2007 are predicted to fall to just 1.8 weeks of consumption by the end of the year, from three weeks, the bureau said.

Brazil's Vale said last year that production at its Goro mine in New Caledonia, the world's largest, would be pushed back by as much as a year to 2008. BHP said Nov. 30 its Ravensthorpe nickel project in Australia, the third-largest nickel mine being built, would be delayed by a year to 2008