Surplus forecast in nickel as demand turns weak 20% global refined production cut so far

Print this page Posted on : 03-27-2009 by recycleinme.com

The four largest nickel refiners have all cut a percentage of their output and many smaller ones have completely suspended production due to an 80 per cent decline in prices from their 2007 all-time highs.

Dow Jones

London, March 26

Nickel miners that have shuttered operations because of plunging prices are hoping they can restart mining by 2010, but more production cuts are likely in the meantime with prices remaining low, demand weak and a surplus still forecast for the year.

The four largest nickel refiners have all cut a percentage of their output and many smaller ones have completely suspended production due to an 80 per cent decline in prices from their 2007 all-time highs.

Global production

Roughly 20 per cent of total global refined nickel production has been cut so far, analysts estimate, but few major cuts have been made since January despite rumours that OAO Norilsk Nickel may taper output at its Africa-based operations, that BHP Billiton Ltd (BHP) might close its Yubulu refinery in Queensland and that Cuba might curtail production, said Societe Generale analyst Mr David Wilson.

''Our sense is that there are more cuts to come, especially if demand does not show the recovery we expect in the second half of the year,'' Macquarie said.

New additions

Anglo-Swiss miner Xstrata PLC estimates that around 350,000 tonnes of refined output will be taken out of the market in 2009, which accounts for one fifth of total production.

In addition, Mr Paul Davis, Vice-President of exploration at Canadian nickel miner First Nickel Inc said a lot of new production was supposed to come online this year but he would be surprised if 20 per cent of it happens.

While the quick nickel response may bring the market closer to balance, many still forecast a surplus. In addition, a recovery in prices will be dependent on a sustained turnaround in the stainless steel industry and that isn't expected yet.

Macquarie still estimates the nickel market will be in a 25,000 tonne-surplus in 2009, and metal consultancy CRU International projects a surplus of 30,000 tonnes in the first quarter of this year.

Source : Business Line