A look into the future: Nickel
Part Two – Continuing from last week’s newswire, Paula Wallace takes a look at what could be in store for nickel.
Yabulu nickel refinery, previously owned by BHP Billiton
Despite BHP’s US$2.54 billion net loss from closing its Ravensthorpe nickel operations and US$685 million loss on the sale of the Yabulu nickel refinery, chief executive Marius Kloppers said the company has no intention of getting out of the nickel business.
He said that although it would not be until 2010 before underlying demand would become clearly visible once more and not masked by inventory effects, BHP did expect a more predictable demand scenario in the coming financial year.
As ABARE expects nickel consumption to recover in 2010, its sees nickel prices averaging at around US$16,000 a tonne for the year.
ABARE’s Rebecca McCallum told The Australian Journal of Mining that we have seen the bottom of the price cycle for nickel in this economic downturn.
“Future movements of nickel prices are likely to be driven generally by world economic growth and to that extent there have been a number of signals that suggest that economic activity will pick up either later this year or in 2010,” she said.
Malachite Process Consulting’s Bruce Wedderburn sees a long-term nickel price of US$4-6 per pound. He said the challenge will be to bring in new production which is economic at these prices.
“The challenge will also be not to base future projects on higher long-term nickel prices, such as US$7 to US$10 per pound, which in my view will not be sustainable.
“This is not to say that we will not see a spike in the nickel prices again in the short-term as the stainless steel markets recover over the next two to three years.”
Wedderburn said any increase in the nickel price above US$6 per pound will be capped by a rapid increase in nickel pig iron production. Additionally, long-term prices may be capped by new technologies for nickel laterites which are yet to be proven on commercial scale.
Metalytics’ long-term nickel price is slightly higher at around US$17,500 per tonne in real terms.
While stainless steel is looking better this quarter, according to Metalytics there is little evidence yet of the sustained fundamental support that will be necessary to get the industry back on its feet.
“Current nickel prices are being sustained by strike action at Vale Inco in Sudbury and by the return of investment funds to metals markets, rather than by increased end user demand.
“Consequently, we should see nickel price dropping slightly from present levels as any sustained demand recovery outside China is delayed until next year,” said Barkas.
While he was not expecting any more price-related production cuts, Barkas said Australian nickel production will be down this year.
“The LME nickel price has only been consistently back above US$13,000 per tonne since late May. I think we will need to see it above $14,000 per tonne for around six months in order to stimulate production.”
According to ABARE, the nickel price is forecast to average around US$15,000 a tonne in the second half of this year, as world economic conditions are assumed to improve, leading to an increase in nickel consumption.
For 2009 as a whole, ABARE said refined nickel production is expected to exceed consumption, resulting in stocks increasing to more than seven weeks of world consumption, 16 per cent higher than at the end of 2008. Reflecting weak demand and increasing stocks, the nickel price for 2009 as a whole is forecast to average US$13,300 a tonne, a decrease of around 40 per cent from 2008.
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