Nickel shortfall
Tan Hwee Ann
Aug. 28 (Bloomberg) -- Nickel supplies may fail to meet demand this year as purchases by steelmakers and manufacturers jump as much as 10 percent, Societe Generale SA said.
There may be a deficit of 25,000 metric tons this year, compared with an earlier forecast of a surplus of 20,000 tons, analysts led by Paris-based Frederic Lasserre at France's third- largest bank said in an Aug. 25 report.
Prices of nickel, used to rustproof steel, reached the highest in at least 19 years on Aug. 22 as companies including Outokumpu Oyj increased output of stainless steel. Stocks of nickel tracked by the London Metal Exchange have dropped 83 percent this year as mining companies such as Inco Ltd., the world's second-largest producer, reported supply disruptions.
``It was always likely that stainless steel would rebound but few can have expected the surge in world production,'' Societe Generale said. Nickel demand ``now looks set to exceed the 8-9 percent predicted by some commentators.''
Demand from developed countries is leading consumption, the analysts said. Manufacturers in Western countries will probably buy 1.075 million tons of nickel this year, up from an earlier forecast of 1.02 million tons, the bank said. The nickel market may remain in deficit of 30,000 tons next year, the bank said.
Stainless steel production may jump 20 percent in the third quarter of the year, from 2005, according to London-based independent steel researcher CRU, Societe Generale said.
Lasserre has worked for Societe Generale for the past 10 years after teaching economics and finance at the Bordeaux Business School in France.
Inventories Drops
Inventories monitored by the London Metal Exchange have dropped to 6,120 metric tons. Prices have more than doubled this year, and reached $29,950 a ton on Aug. 22, the highest in at least 19 years according to Bloomberg data. The metal closed at $29,400 a ton on Aug. 25 in London.
``Whilst supply disruptions have certainly played a role, the driving force has undoubtedly been the astonishing cyclical recovery of demand,'' Societe Generale said.
Mining companies lost as much as 25,000 tons of production in the first-half of 2006, or about 2 percent of total global output last year. Shortfalls will likely continue in Indonesia, and may be worsened due to a strike at Toronto-based Inco's Voisey's Bay mine, the bank said.
Strike Cuts Output
PT International Nickel Indonesia, a unit of Inco and the Southeast Asian nation's largest nickel miner, had an accident at its furnace in May that will cause output to drop to 158 million pounds for the year, down from a target of 167 million pounds.
A strike at Inco's Voisey's Bay mine in Canada may drag on for months, a union executive said Aug. 2. The strike at the mine, which produces about 4 percent of global nickel output, began on July 28.
Demand has also risen in China, where stainless steel production will likely rise more than 25 percent to 4.7 million tons this year, according to Beijing Antaike Information Development Co., which advises the Chinese government on industry policies.
Chinese consumption will boost nickel demand by 35,000 tons, or half the projected increase in global demand, Xu Aidong an analyst at Antaike said July 7.
Global nickel use may rise to 1.33 million tons this year from 1.26 million tons last year, she said.
To contact the reporter on this story: Tan Hwee Ann in Melbourne hatan@bloomberg.net
Last Updated: August 27, 2006 23:34 EDT
Email this article Printer friendly format
RSS
Advertisement: A surprising prediction by Ken Fisher - Get his forecast here!
Top Energy Stocks
Fast moving oil and gas stocks with huge potential. Free newsletter |
