nickel

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    Nothing startling but another positive view on the future for Ni prices from the CEO of Inco (yes I know .. he would say that wouldn't he...)

    Reuters
    Inco sees nickel shortfall, strike not mentioned
    Monday June 9, 10:30 am ET


    LONDON, June 9 (Reuters) - Inco Ltd (Toronto:N.TO - News), the western world's largest nickel producer, sees the nickel market moving into a period of significant shortage, the company's CEO said on Monday, without mentioning a strike at its operations in Sudbury, Ontario.
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    Speaking at the UBS Global Basic Materials Conference in London on Monday, Scott M. Hand, Chairman and Chief Executive Officer at Inco Ltd , said in a prepared presentation that what distinguishes nickel from other base metals is an excellent demand trend going forward, coupled with limited supply.

    "Nickel offers perhaps the best, or at least one of the best, prospects in the metals industry," Hand said.

    Production at Inco's Sudbury facilities ground to a halt on June 1 after 3,300 workers walked off the job when their labour contract expired without a new agreement with Inco after two months of talks.

    Two days later the company said its regional marketing units were declaring force majeure on some sales contracts.

    London Metal Exchange benchmark three-months nickel prices subsequently surged on heightened supply worries and on Friday hit a zenith of $9,550 a tonne, the metal's highest level since June 2000.

    Prices have since eased on profit taking and at 1350 GMT, stood at $9,280/9,300, but sector analysts said that as long as the strike at Inco continues, the nickel market will be supported and prices are likely to forge higher once more.

    "As the two sides have no talks scheduled, we could be looking at a prolonged dispute. We have seen, and will no doubt continue to see, bouts of profit taking (on nickel), but for the moment fundamentals continue to point higher," Angus MacMillan, minerals strategist at Prudential Bache International, said.

    Nickel is used primarily in the production of stainless steel, which absorbs around 75 percent of nickel output.

    "I should note that the nickel industry is operating near capacity and, in contrast to other metals, has virtually no shutdown capacity. Also, the top five producers represent over 55% of global nickel supply," Inco CEO Hand said.

    "Our view of the underlying market balance for 2003 suggests a deficit of 30,000 tonnes. Given the assumed 36,000 tonnes of de-stocking from Russia in the first four months of 2003, we expect the overall market balance to reflect a small surplus of 6,000 tonnes -- basically a balanced market, with low inventories as we enter a period of significant shortages," Hand added.

    LME warehouse stocks currently stand at just under 26,000, around double the March low of 13,000 tonnes, but sector analysts said that much of the LME stocks are held in strong hands, and how much of the current total is available to the market is debatable.

    In his presentation, Hand concentrated primarily on the influence of China on the nickel market.

    "China's importance will accelerate throughout this decade in terms of both exports and domestic consumption. It is true that Chinese nickel demand has grown strongly in the last two years, even when Western economic growth was flat to negative," Hand said, adding that China represented three-quarters of last year's rise in world nickel demand.

    Hand added that because of the global tightness of nickel, any drop in demand due to the SARS virus would only provide minor relief from the nickel shortages expected.

    "Last year was a good one for our product and 2003 is shaping up even better, with significant stainless capacity expansion, the ongoing industrialization of China, (and) low nickel inventories. Year-to-date nickel prices are up over 30 percent," Hand said.


 
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