Sumitomo Metal Mining Co said that a global nickel surplus may narrow on increasing stainless steel demand from China and as new mining projects have stalled, limiting a decline in prices.
Mr Toru Higo GM of nickel sales and raw materials said that supply will likely exceed demand by 20,000 tonnes in 2011 from an earlier estimate of 35,000 tons projected in April after the March 11th 2011 earthquake and tsunami in Japan. In 2010, demand outstripped supply by 63,000 tonnes, the first deficit since 2006.
The International Nickel Study Group said on April 12th 2011 that prices that have fallen 0.6% this year, making nickel the worst performing base metal on the London Metal Exchange. Nickel is used for corrosion resistance in stainless steel. Global stockpiles may climb this year as output gains to 1.6 million tonnes while usage is forecast to rise to 1.54 million tonnes.
Mr Higo said that "The narrowing surplus is because of increasing demand by China to make stainless steel." He added that output from China, the biggest user and consumer of stainless steel, won't be badly affected by the nation’s tightening monetary policy to curb inflation.
Mr Higo said that world stainless steel output may increase to 33.3 million tonnes in 2011, up from the company's April forecast of 32.3 million tonnes. China's output is expected to rise by 500,000 tonnes to 12.8 million tonnes.
A delay at Sherritt International Corporation's Ambatovy mine project in Madagascar, slowing output at Vale SA's Goro mine in New Caledonia and Onca Puma mine in Brazil as well as trouble at its Copper Cliff furnace earlier this year in Canada will narrow the expected surplus.
Sherritt, which owns 40% of Ambatovy, said on June 14th 2011 that production would begin in the first quarter of 2012. Korea Resource Corporation, which holds 17.5%, said on March 31st 2011 that production would start in the second half of this year.
Mr Michael Widmer, head of metals research at Bank of America Merrill Lynch in London, said that "The physical nickel market has been weakening, mirrored by steady declines of physical premiums in recent months." He was the most accurate forecaster for the metal for the eight consecutive quarters ended March 31st 2011.
Mr Widmer said that "At the same time, nickel stocks continued to trend lower, which may have been influenced in part by the underperformance of nickel production, i.e. producers resorting to LME stocks and deliver these to costumers."
Mr Higo said that world nickel output is expected to increase 12% to 1.59 million tonnes in 2011, while consumption may rise 5.7% to 1.57 million tonnes. China's output may grow to 365,000 tonnes in 2011, including nickel pig iron, from 335,000 tonnes in 2010, while the country's demand will likely rise to 630,000 tonnes from 575,000 tonnes.
Mr Higo said that in Japan, nickel demand may decline 1.9% to 146,700 tonnes in 2011, while output will likely drop 6% to 151,700 tonnes. The nation's exports are expected to slump 11.6% to 67,700 tonnes following the quake.
(Sourced from www.bloomberg.net)
