An executive of Norilsk commented that the crash of LME nickel price which happened on September 21st 2011 through September 22nd 2011 made about 10% of the nickel producers operate without profit, i.e. at the price level of USD 18,000 to USD 18,500 per tonne.

He added that "Production cut of 30,000 tonnes during the October to December quarter of 2011, and further 100,000 tons of cut will be required in 2012."

TEX Report's research forecasts that, while world nickel production during the first half of 2011 was 791,000 tonnes, up by 12% YoY, full year production of 2011 will be, together with the production from new units of 30,000 to 35,000 tonnes, 1.58 to 1.60 million tonnes.

However, things have changed with the sudden drop of the LME price. About 35% of the price fluctuations of nickel caused by nickel pig iron production swing, and about 23% is by market sentiments (bull or bear) especially of speculators from funds, then comes supply and demand situation as the third biggest major factors.

Background of the recent big drop in LME nickel price is of course the financial crisis in Europe ignited by Greece, but it is at the same time necessary to note that forecast of oversupply situation is casting a gloom over the price.

Nickel was short in supply during the first half of 2011, but in the second half situation is forecasted to turn into oversupply.

It is of particular interest that the executive commented the Chinese NPI producers would be the first that would fall into unprofitable operations at USD 18,500 per tonne level, although the other producers in Russia, Europe and Japan are also vulnerable to such a low level.

Also, he said, suppliability from the newcomers who postponed full scale production start up to 2012 or later would be a big risk bearing factor to foresee the market situation and to forecast nickel price in the coming 2 to 3 years.

(Sourced from TEX Report Limited)