Nickel info:
July 26, 2006, 1:38PM
Market Spotlight: Nickel
© 2006 The Associated Press
NEW YORK — Dwindling nickel supplies and increasingly strong demand have recently powered the metal's market price to historic heights _ amid a rash of consolidation efforts by the industry's largest producers.
Nickel spiked to a record $29,600 per metric ton on the London Metal Exchange earlier this month and has retreated only slightly since. Last year, nickel averaged just $14,738 a ton.
In May, the mean nickel price quoted on the London Metal Exchange climbed to $21,064.52 for the month _ a peak it hadn't seen since 1987, according to Pete Kuck, a physical scientist with the U.S. Geological Survey.
LME nickel settled at $24,400 a ton on Wednesday.
"Supply hasn't grown fast enough to meet demand," said BMO Capital Markets analyst Victor Lazarovici, who covers base metals and mining for the brokerage. "Merchants and others are using inventories to fill the gap. The market has been getting crazy as a result."
London Metal Exchange nickel stocks, a key measure of the metal that is most readily available to consumers, have shrunk to 5,424 tons _ a rapid depletion of the 36,042 tons on inventory in January.
In a recent conference call, Inco Ltd., the world's No.2 nickel producer, said its own inventory is 3,840 tons below the company's 10-year average for the end of the second quarter. The company is turning away nickel orders from customers.
Peter Goudie, Inco marketing executive vice president, called 2006 "the tightest nickel market we have ever seen."
It is not only the inventories on the LME that are decreasing quickly; we observed a shortage throughout the supply chain," he said during the call. "Consumers do not want to hold nickel inventories at these high prices and this level of price volatility."
Nickel is used to make stainless steel, which is in turn used in all sorts of industrial applications including vats for processing dairy products, airplane jet engines and power plant turbines. Production of stainless steel has made a sharp recovery from the fourth quarter last year and is up significantly over the longer term.
Stainless steel production has roughly tripled in 15 years, said Kuck of the USGS. World production grew 26 percent over five years to 24.3 million metric tons in 2005.
"Of course, in places like China where they're growing great guns, their stainless steel production is skyrocketing," Kuck said. "They're stockpiling nickel. But you can't just blame it on China _ it's the whole world."
A spate of merger-and-acquisition activity has also roiled the nickel market recently. Copper miner Phelps Dodge Corp. agreed in June to acquire both Inco and its Canadian rival Falconbridge _ which is also the target of several other large mining companies. Europe's Xstrata plc, which already owns 20 percent of Falconbridge, recently upped its hostile bid for the company to $16.9 billion in cash. Phelps Dodge and Inco's combined bid for Falconbridge amounts to $17.3 billion in cash and stock.
Russia's Norilsk Nickel is the world's largest nickel producer.
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