Nickel rebound unlikely in 2011-12 on weakening demand - CommodityOnline

LONDON/MUMBAI (Commodity Online): After reaching the year high of more than $28500 in late February, Nickel prices at the London Metal Exchange (LME) is trading around $24000 with the future of the metal looking increasingly grim.

“If there is a glitch in the global economy, demand for industrial metals will go down. It’s dangerous to depend on nickel” said Vladimir Strzhalkovsky, CEO of the Russia’s OAO GMK Norilsk Nickel, world’s number one nickel producer.

Nickel is very closely linked to the economic growth. Over 60% of nickel mined on an annual basis (about a million tons) goes straight toward production of heavy-duty stainless Steel alloys. It goes into our cars, into aircraft bodies, and into the steel frames of modern high-rise buildings. The remaining 40% is consumed by other essential modern applications such as nickel-copper alloys used in wiring and electronics, heat-resistant alloys used in internal combustion engines, jet and rocket engines, as well as other high-tech uses including batteries and conductors.

“Nickel supplies are increasing at a time when economic growth is showing signs of weakening” stated U.S. Federal Reserve Chairman Ben Bernanke.

Nickel consumption has been hurt in China due to increasing use of nickel-iron-pig(NPI) for stainless steel

Analysts not positive on Nickel

-Next year surplus for Nickel is estimated at 60,000 MT rising from an expected 12,000 MT this year according to Bank of America Merrill Lynch. This will make nickel the most oversupplied metal relative to output or use.

-Nickel prices are expected to drop to $20,000 a ton by December 31 2011, according to the median estimate in a Bloomberg survey of 17 analysts and traders.

-“I’m not particularly optimistic about nickel,” said Ian Henderson, who manages about $10 billion of natural-resource assets at JPMorgan Chase & Co. in London. “A nickel price of $15,000 is entirely possible.”He went on to add.

At the Multi-Commodity Exchange of India (MCX), Nickel is trading at levels of 1060 after its May high of around 1225, a decline of over 13%.