Here is some nickel market commentary from Jim Lennon, Mac Banks...

Here is some nickel market commentary from Jim Lennon, Mac Banks expert.

All Eyes on Nickel – Strong Even Without A Strike
• The expiry of Inco’s labour contract at its Sudbury operation on May 31 as of May 30 (when this report was written!) appeared likely to lead to a strike at this operation. The importance of Inco’s Sudbury operations to the nickel market derive from the fact that it is the second largest operating site for nickel (after Norilsk’s Taimyr Peninsular operations) and at 100,000 tpa accounts for around 9% of global production.
• The current physical market is reported to be extremely tight with consumers struggling to lock in all their short-term needs. Inco’s particular sales mix, combined with its low stocks means that it may declare force majeure on its sales as early as the first week of a strike.
• By Friday, the LME cash nickel price had regained the $4/lb level which it last achieved in late-February, more than double the low seen in October 2001. Prices had dived in March and April following the announcement by Norilsk that it was releasing 36,000t of nickel from a 60,000t stock that it has used as collateral for a $200m loan last year. The release of the 36,000t has to date resulted in a net rise in LME stocks of 13,800t from their early-March low.
• The existence of 26,742t on the LME would at first glance appear to suggest that the market is not as tight as some are saying. However, we suspect that control of the LME stock is iron-clad and this plus the remaining 24,000t of Norilsk stock is just about all of the excess stock available to the market.
• The rest of the Russian nickel that has not gone on the LME has apparently gone to consumers and into China – Chinese nickel imports in all forms were around 29,000t in January-April, compared with 10,000t in the first four months of 2002! Chinese apparent consumption of nickel (production plus net imports) was around 48,000t in Jan-Apr 2003, up 63% y-o-y (from 29,500t).
• The current tight market is due in no small measure to an explosion in stainless steel production. Latest available data on world stainless steel production indicates that production was up 10% y-o-y in the first quarter of 2002 and over 12% y-o-y in March alone:
• The strong rise in production is due to the commissioning of new capacity in the USA, Belgium and Finland and booming Japanese production (for export to China). Production in these four countries alone in March was 766,000t, up an incredible 26% y-o-y. In April, Posco in Korea commissioned a new 600,000 tpa facility which it hopes will reach full capacity within four months.