According to UBS AG, nickel may drop as much as 23% by the end of 2010 as demand weakens for stainless steel, the main source of consumption for the metal.

Mr Tom Price analyst at UBS said that immediate delivery nickel may fall as low as USD 16,535 a tonne. Prices probably will breach February's 2010 low of USD 17,030 before rebounding next year.

He added that "The third quarter is the weakest quarter for the nickel trade. Demand will wane as producers take some of the stainless steel mills off line for maintenance in China, in Europe and in the US."

Barclays Capital said on August 13th 2010 that growth in world nickel usage will slow to 8.4% in the current quarter, down by almost half from the prior three months. Demand from China, the world’s biggest consumer, will stay at 377,000 tonnes in 2010 after a 32% jump in 2009.

UBS is the most accurate forecaster so far of spot nickel’s average third quarter price among 17 banks surveyed by Bloomberg News in May 2010. The metal has averaged USD 20,279 a tonne as compared with the USD 20,282 predicted by the Zurich based bank. The survey estimated that spot nickel would average USD 21,250 for the quarter.

According to UBS, prices will find support as the market moves into deficit this year and the global economy recovers. Demand will outpace supply by 32,000 tonnes in 2010 after a 47,000 tonne surplus in 2009.

Vale SA, the fourth biggest nickel producer in 2009, said on August 9th 2010 that it had started producing metal at its 60,000 tonnes a year Goro mine in New Caledonia and a refinery probably would be operating by the end of the year. Vale workers at Canadian plants in Sudbury and Port Colborne in Ontario voted on July 8th 2010 to end a year long strike.

According to Barclays Capital, Vale produces about 150,000 tonnes of nickel a year in Canada. It estimates that global supply of the metal will increase 7.1% in 2010 to 1.4 million tonnes after a 3.5% drop in 2009.

(Sourced from www.bloomberg.net)