Bloomberg reported that a global nickel surplus may soar in 2012 to the highest in four years as Europe's debt crisis and a sluggish US economy cuts demand.

Mr Toru Higo, Sumitomo Metal Mining Co's general manager of nickel sales and raw materials said that supply will likely exceed demand by 54,000 tonnes in 2012, the biggest surplus since 2008. Demand outstripped supply by 63,000 tonnes in 2010, the first deficit since 2006, before moving to a surplus of 11,000 tonnes in 2011.

According to the International Nickel Study Group, prices of the metal, used for corrosion resistance in stainless steel, have fallen 25% in 2011, making it the worst performing base metal on the London Metal Exchange. The global surplus will increase to 70,000 tonnes in 2012 from 30,000 tonnes in 2011.

Mr Higo said that "Demand growth may slow following Europe’s debt crisis and a slowing US economy."

Output from Sherritt International Corporation's Ambatovy mine in Madagascar, Vale SA's Goro mine in New Caledonia and Onca Puma mine in Brazil as well as its Copper Cliff furnace in Canada, may increase in 2012.

Mr Higo said that world stainless steel output may increase to 34.6 million tonnes in 2012 from 32.8 million tonnes in 2011. Output by China is expected to rise to 14.4 million tonnes from 13 million tonnes, as the country will keep driving global consumption growth in 2012.

Barclays' Mr Berry said that "Production costs will largely determine nickel’s price range for the foreseeable future. Relative nickel pig iron and refined nickel price levels will determine the composition of Chinese nickel needs now that nickel pig iron is a perfect substitute for refined nickel in a number of applications."

(Sourced from www.bloomberg.net)