AP: Nickel prices to fall further although output cuts loom
Reuters reported that a freefall in the nickel price from record highs above USD 50,000 a tonne is set to continue into next year, with the industrial metal likely to plunge well below USD 10,000 as a global economic downturn bites. But faced with slumping demand from steel mills and new mining projects coming on stream, producers will come out fighting and slash output further to provide a price bounce.
Nickel 3 month contracts in London were trading around USD 10,100 a tonne, down by 80% from the all time high of USD 51,800 hit in May 2007, and pushing the market to below break even level for some miners.
Mr Richard Knights analyst at Numis Securities said that "At current prices some 50% of the nickel industry is losing money. It is not a sustainable situation. It is all about timing and how quickly operations shut down."
LME nickel stocks are currently near its highest level since May 1999 and stand at over 55,470 tonnes, suggesting a large surplus. Royal Bank of Scotland research this month said world finished nickel production was 1.434 million tonnes last year and forecast to fall to 1.415 million tonnes in 2008.
Mr Neil Buxton MD at GFMS Metals Consulting said that "On demand, it's difficult to be upbeat about prospects. Once a metal has lost market share, it rarely regains it."
This week Canada's First Nickel Inc said that it suspended production at its Lockerby Mine and cut some 150 jobs. BHP Billiton Ltd shut down its 100,000 tonne per year Kalgoorlie smelter for four months of repairs during the summer, while Xstrata Plc temporarily suspended operations at its Falconbridge dominicana mine.
