* China key to world nickel demand * Indonesia unlikely to ban all ore exports from 2014 Oct 12 (Reuters) - The global nickel market will move into over-supply from 2012/2013, pushing prices for the metal lower in the medium term as a host of new projects come on line and build up to capacity, Wood Mackenzie said on Wednesday. With a total of some 300,000 tonnes a year of capacity recently started up or planned, a move into a sustained period of supply surplus has been anticipated for the past three years. But delays to projects, particularly those using high pressure acid leach (HPAL) technology, have forced analysts to defer the predicted timing on several occasions. "The difference now is that these projects are built and ready to go...We're looking at over-supply from 2012/2013 and anticipate downward pressure on prices going forwards," Wood Mackenzie's Senior Nickel Analyst, Andrew Mitchell said at a briefing. China is seen key to global demand for the metal, used mainly in stainless steel. Consumption there is expected to grow by 9 percent a year, propping up global growth at a still healthy 5-6 percent annually. But with supply the key, Mitchell expected nickel prices by 2015 to fall towards marginal cost production levels of around $7.50 a lb ($16,500 a tonne.) The London Metal Exchange (LME) three-months nickel price was last at $19,122 a tonne. In September, nickel fell below $17,000, its lowest since December 2009, and down over 40 percent from levels close to $29,500 in February, as demand worries pummeled industrial metals. Wood Mackenzie takes a cautious view on new projects, allowing six to seven years for an HPAL project to reach capacity and around four years for a ferro-nickel operation. Bearing this in mind, Mitchell said further project delays to projects could reduce global supply by up to 25,000 tonnes next year. Those delays would not last longer than 6-12 months he added. The progress of Sherritt International's Ambatovy nickel-cobalt project in Madagascar will be most keenly watched as an indication of the future success of HPAL technology, given the company's expertise in the field. In June, the Canadian company said it expected a roughly six-month delay and a 16 percent increase in costs at the project. It now expects first production in the first quarter of 2012. CHINA'S NPI Prices at $7.50 a lb would start to affect some higher cost producers of nickel in pig iron (NPI) in China, Mitchell said. "We could see an immediate reaction, acting as a buffer for the market. They can switch off and come back on quite rapidly," he said. Indonesia's plans to ban ore exports by 2014 could also have an impact on China's NPI industry, which is heavily reliant on nickel imports from Indonesia and the Philippines. Such a move could reduce China's nickel in NPI output by 200,000 tonnes a year, Mitchell estimated. "I don't think they'll stop all ore exports, there's too much revenue to lose, but I see some stemming of the flow," Mitchell said.

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