Bloomberg reported that nickel may drop by 8% in the second quarter, eroding its lead as this year's best performing metal, on concern that demand won't accelerate fast enough to drain stockpiles. According to the median in a Bloomberg survey of 13 analysts, prices will average USD 20,944 a tonne in the next quarter, down from yesterday's USD 22,760 close. Nickel rose by 23% on the London Metal Exchange since January, extending last year's 58% jump. The metal is having its best start to a year since 2007 as stainless steel output, the biggest source of demand, exceeds analysts' expectations. That advance may falter as supply from new mines adds to stockpiles already at more than three times the 5 year average. Mr Dan Smith, an analyst at Standard Chartered Plc in London, said that "Inventories are incredibly high and when the supply side starts to come back on, that means that the upside is very limited." He expects a second quarter average of USD 16,000. Vale SA said on March 16th 2010 that its Goro mine in New Caledonia would produce the first metal this month or next. New mine supply will likely mean production exceeds demand from next year. About two thirds of nickel is used in stainless steel to make it harder. Production of the alloy may reach as high as 29 million tonnes this year, from 25.2 million tonnes last year.

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