World Business

Nickel hits its highest price in 23 months

By Jae Hur and Jason Scott (China Daily)
Updated: 2010-04-17 10:37

Recovery boosts demand amid talk that market will swing into deficit

TOKYO - Nickel, used to make stainless steel corrosion-resistant, advanced to the highest level in 23 months on speculation the market will swing into deficit for the first time in four years as a recovering economy boosts demand.

The metal for three-month delivery gained as much as 0.6 percent to $27,400 per metric ton, the highest price since May 2008, and traded at $27,312 a ton at 1:52 pm in Singapore. Tin rose to the highest price since Sept 18, 2008, while aluminum and zinc fell after China announced measures to cool the real-estate market.

Nickel hits its highest price in 23 months

Nickel has jumped 60 percent in 10 weeks and more than doubled in the past 12 months as the fastest growth in almost three years in China, the biggest user, boosts consumption of stainless steel in homes, buildings and the food and chemical industries. Shares of OAO GMK Norilsk Nickel, the world's largest producer of refined nickel, have soared 149 percent in the past year.

"The stainless steel market has picked up but the mines are still shut," said Peter Strachan, a Perth-based analyst for independent advisory company StockAnalysis. "It takes months and a lot of capital to start these mines back up."

World demand will probably exceed supply by 36,000 metric tons in 2010, the first deficit since 2006, said Akira Nozaki, general manager in the nickel sales and raw material division of Sumitomo Metal Mining Co, Japan's biggest producer. The market had a surplus of 27,000 tons last year, he said in an interview April 14. Two-thirds of world supply is used in stainless steel.

The global shortfall may be 18,600 tons, according to Morgan Stanley March 31. Barclays Capital predicted a deficit of 6,000 tons on March 19 and Vanessa Davidson, managing consultant in the nickel and chrome group at London-based researcher CRU, said March 18 the deficit would be 56,000 tons.

"We don't agree nickel will move into a deficit this year as we're expecting a surplus to widen," Judy Zhu, an analyst at Standard Chartered Bank, said from Shanghai this week. "We think the price gains are excessive given the metal has comparatively the highest level of stockpiles."

Inventories in warehouses monitored by the LME climbed to 166,476 tons on Feb 8, the highest level in at least more than three decades. Inventories now total 151,878 tons.

"Although we may see a correction, the outlook for nickel will remain bullish in the second quarter when stainless steel output grows," said Hwang Il-doo, a senior trader with KEB Futures Co in Seoul. "Stockpiles have been declining amid production disruptions at Vale's Sudbury and BHP's Nickel West Leinster operations."

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