By Leia Michele Toovey- Exclusive to Nickel Investing News

Nickel futures continued to exhibit a weak trend backed by high inventories and poor demands from stainless steel makers.

On India’s MCX, August 2008 contracts were down by 26 per cent to trade at Rs 806 per kg on Monday. The ongoing downside movement is expected to continue in the short-term and prices are expected to test the Rs 700-680 levels.

In the second quarter of 2008, LME nickel prices averaged $25,859 a tonne, which was lower by over 11 per cent compared to the first quarter average of $29,120 a tonne.

Despite reports of shrinking stainless demand, the International Stainless Steel Forum (ISSF) reported that it expected an increase in production as a number of projects in Australia, Turkey and Brazil are scheduled to come online. The expected world mine production for 2008 stood 8.4 per cent higher at 1.6 million tonnes, compared to the previous year. Stainless steel production decreased by almost 12 per cent in the region during 2007. Western Europe and Africa decreased their stainless crude steel production by 13.3 per cent to 8.7 million tonnes in 2007. The latest data from International Nickel Study Group (INSG) showed the global nickel market was moving further into surplus in June. The group reported refined nickel production of 117,000 tonnes in June versus consumption of 109,000 tonnes. For the first half of 2008, INSG reported production of 719,100 tonnes and consumption of 683,300 tonnes, generating a surplus of 35,800 tonnes.

The latest from Norilsk

Rusal is attempting to gain support for proposals that would see the number of members on Norilsk Nickel’s board increase to thirteen from nine. The saga has gathered pace after Vladimir Potanin installed his associates to key positions at Norilsk Nickel after an annual meeting last month. In addition, last week, United Company RusAl issued complaints about Norilsk’s environmental practices. To add to the drama, this Monday, a report came out stating that a Russian state official had been accused by the General Prosecutor of illegally having granted Norilsk Nickel pollution permissions. The illegal permissions might have caused environmental damage worth over one billion rubles.

At the same time, Vladimir Strzhalkovsky, CEO of Norilsk Nickel issued a letter refuting last week’s charges made by RusAl. The letter was lengthy, but here are some excerpts: It is worth mentioning that presently, MMC Norilsk Nickel is implementing a comprehensive environmental program that involves retrofitting of production facilities, incremental shutdowns of outdated operations, reduction of pollutants emissions into the atmosphere and efficient management of water resources. The Company intends to spend about 36 billion rubles from 2007 to 2015 to support its environmental initiatives. In view of the above, the feasibility study that you kindly propose to administer seems unnecessary.” He concludes the letter with the remark, “I deem it advisable that in the future, issues of this nature should be discussed in accordance with best international practices at internal meetings or at meetings of MMC Norilsk Nickel Board of Directors, of which you are a member.”

Vale growth dependent on iron ore as nickel weak

Brazil’s Vale (NYSE:RIO) is holding on to the hope that their 2008 iron ore revenues are strong enough to continue to trump weak nickel income. Last week, Vale reported second quarter net profit of $5.01 billion, up by 22 per cent from the same period of the previous year. Gross revenue was $10.9 billion, up from $8.89 billion. Nickel, which is the second most important revenue stream for Vale, ended the second quarter with a share of 17.2 per cent in Vale’s revenue total as compared with 35.9 per cent a year ago. The average price for the the three month nickel contract on the London Metals Exchange was $25,901 per tonne in the second quarter, down from an average $46,035 in the second quarter of 2007

Jinchuan unable to achieve targeted nickel production in H1

The Jinchuan Group of China was unable to achieve its targeted nickel production in the first half of 2008, as an earthquake and snow damage put a damper on production. Jinchuan reported a turnover of $4,497 million for the period January-June 2008, 58.6 per cent of their annual target, and an increase of 1.3 per cent from the same period one year earlier. Its profit before tax also came to $928 million, which achieved 85.3 per cent of its annual target. The quantities of nickel and copper produced by Jinchuan Group in the first half of 2008, however, had decreased in comparison with those planned to produce in the full year of 2008. Jinchuan was initially scheduled to 120,000 tons per annum of nickel and 280,000 tons per annum of copper in 2008 but the actual quantities produced in the first half of 2008 had reached 47.3 per cent for nickel and 42.8 per cent for copper compared to those as planned at the beginning of 2008