Nickel is showing “signs of life” after plunging last year, Macquarie Bank Ltd. said, citing indications of a revival by the stainless-steel industry, the main consumer of the metal. Demand for stainless steel reportedly is rising in Europe and parts of Asia, particularly Taiwan, Jim Lennon in London and other Macquarie analysts said today in a report, without giving more details. That follows estimated plunges of more than 30 percent in worldwide production in both of 2009’s first two months from a year earlier, the bank said. “Such an enormous rate of decline suggests a major de- stocking cycle was under way,” Macquarie said, predicting a 32 percent jump in stainless-steel production in the fourth quarter. “This gives some hope that when the de-stocking ends, demand could rebound dramatically.” Global use of nickel slid 27 percent in January and February, according to International Nickel Study Group figures cited by the bank. The metal has rallied this month in London, where nickel for three-month delivery had added 32 percent in three weeks when trading ended on April 17. “Most participants in the market are incredulous at the rally,” Macquarie said. Three-month nickel fell $500, or 3.9 percent, to $12,325 a metric ton at 12:45 p.m. on the London Metal Exchange. The bank expects a 37,000-ton surplus of the metal this year, down from an anticipated 84,000 tons in 2008. Nickel has plunged 76 percent from its record peak of $51,600 a ton in May 2007 after the world financial crisis hurt demand for metals. Vale Inco Macquarie cited concern about potential supply disruptions at Cia. Vale do Rio Doce’s Vale Inco nickel operations in Canada, where new labor contracts are due for renewal at the end of May, according to the bank. News that Vale Inco would shut down its Sudbury nickel operations for eight weeks helped nickel to rise 16 percent on the LME last week. “This could affect around 100,000 tons” of nickel, or about 8 percent of this year’s global supply, Macquarie said of the contract renewal. “Being short ahead of a potential Vale Inco strike may be risky.” Lower prices and slowing economies have eroded the supply of scrap stainless steel, the source of almost half the nickel used to make the metal, Macquarie said. “Reports from the market indicate that scrap availability will fall by more than 20 percent this year,” the bank said. “In China, we have heard of a scramble to buy ferronickel from the import market as a result of tight scrap availability.”

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