Inco forecasts 10,000 mt global nickel deficit in 2006 New York...

Inco forecasts 10,000 mt global nickel deficit in 2006

New York (Platts)--21Apr2006
Canadian integrated mining group Inco has forecast a 10,000 mt worldwide
deficit of nickel in 2006 compared with an 11,000 mt surplus in 2005 and a
6,000 mt surplus in 2004.

Speaking at Inco's first-quarter earnings conference call for analysts
this week, Peter Goudie, Inco's executive vice president of marketing, said
there was more than speculation to firmer nickel prices, noting that it was
the third time in three years that nickel had risen above $17,000/mt.

He estimated world production and supply at 1.339 million mt in 2006 and
world demand at 1.349 million mt compared with 2005 production/supply of 1.289
million mt and demand of 1.278 million mt.

"The nickel market is about fundamentals; nothing more, nothing less," he
said, adding that nickel had already exceeded Inco's expectations so far this
year. He said the main factors behind higher prices were the
stronger-than-expected rebound in global stainless production, a tightening
sc$rap market, strong non-stainless growth, limited nickel supply growth and
low inventories.

He noted that London Metal Exchange inventories had declined from a peak
since February by 23% to around 28,000mt.

Goudie estimated that global Q1 stainless steel production had risen by
11% from Q4 2005 levels, representing an increase of 600,000 mt. China has
registered a 19% increase, while the US had seen a 12% rise, and Western
Europe recorded a 13% gain. South Korea and Taiwan both saw 5% increases,
while the Japanese industry achieved a 3% growth in stainless steel output.

He estimated that nickel demand from the global stainless steel industry
had risen by 13% in Q1 2006 compared with Q4 2005, adding that in addition to
increased output, this was also helped by a higher "austenitic [nickel
containing stainless steel] ratio and lower sc$rap ratio."

Goudie said that austenitic ratios had moved higher since bottoming in Q3
2005. and Inco estimated austenitic ratios at around 76% for Q1 2006, up from
75.5% in Q4 2005 and 73.2% in Q3 2005.

As a result of higher prices, the sc$rap ratios in stainless steel have
fallen to an estimated 47% in Q1 2006 from 48.2% in Q4 2005 and a recent peak
of 52% in Q3 2005.

Meanwhile, world non-stainless demand for nickel is showing steady
growth and Goudie forecast a 6% increase in 2006 to 525,000 mt from 500,000 mt
in 2005. Growth was strong in high nickel alloys, used in aerospace,
industrial gas turbines, energy applications and in the gas containment
systems for ocean-going liquefied natural gas carriers. Other products, such
as batteries in hybrid electric vehicles, batteries in the electronics
industry and metallurgical powders were also showing strong demand for nickel,
Goudie said.

He said that nickel production gains would be limited in 2006 as the
industry was already running at capacity. Goudie also noted that the threat of
strikes and slow restarts, feed shortages, extended maintenance, inclement
weather and ramp-up delays could curb production.

--Anthony Poole; [email protected]

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