Western Areas NL (WSA), Australia’s second-biggest nickel producer, said prices are rebounding and will extend gains in the next three years, aided by Chinese demand. Nickel, used to harden steel, may climb to $10 a pound by the end of the year as annual demand, led by China, grows as much as 6 percent, Dan Lougher, managing director at the Perth- based company, said today in a phone interview. Prices may exceed $12 a pound after 2013 as China’s production of lower- quality nickel pig iron, estimated to account for 15 percent of global demand, dwindles and Indonesia imposes an export ban on unprocessed metal starting 2014, he said. Nickel prices fell 24 percent to $18,710 a metric ton last year, or $8.5 a pound, reflecting lower demand from stainless steel consumers in Europe. An increase in prices, which have gained 6.5 percent this year, will mitigate rising production costs at producers in Australia, Lougher said. “We’re obviously very bullish looking at the price and demand will be strong in China,� Lougher said. “Production of nickel pig iron in China is actually going to be a problem at some point with some of the producers being shut down.� Melbourne-based BHP Billiton Ltd. (BHP), the largest nickel producer, this month cut the mining rate at Nickel West in Western Australia by 30 percent, citing lower metal prices and a rising Australian dollar that drove up costs. Global supply will also be hit when Indonesia begins to impose a regulation requiring mining companies to process metal ores locally from 2014, Lougher said. “Indonesia is a major supplier of raw material to the nickel pig iron industry in China,� he said today. “Further restriction of material sources for the nickel pig iron producers is likely to even further hamper the expensive economics of nickel pig iron.� To contact the reporter on this story: Soraya Permatasari in Melbourne at soraya@bloomberg.net To contact the editors responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net; Andrew Hobbs at ahobbs4@bloomberg.net

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