By Leia Michele Toovey- Exclusive to Nickel Investing News

^[1]Nickel has witnessed a year of poor performance, with a decline in stainless steel demand to blame. Towards the end of last week, though,  things started looking up for nickel and the commodities in general, as buoyant metal prices ^[2] sparked a strong rally in mining shares.

The market responded favourably to Monday's announcement of the rescue by the U.S. government of embattled mortgage firms, Fannie Mae and Freddie Mac. A soft dollar against the euro also helped to push prices higher. London Metal Exchange nickel jumped up to 6 per cent on Friday.  Mining giants Rio Tinto, Xstrata, BHP Billiton and Anglo American soared between 7.3 per cent and 8.4 per cent.

Fast forward this week, and the market hit turmoil. Lehman Bros filed for bankruptcy protection, Bank of America purchased struggling Merrill Lynch, and AIG joined the likes of Freddie and Fannie in a government rescue. Commodity company shares fared even worse than financials as nickel joined the likes of lead, zinc and aluminum in a 2 per cent price slide. Mining companies took a hit, BHP, the world's largest mining company slipped 4.5 per cent, and Rio Tinto, the third biggest, dropped 7.7 per cent.

Analysts are anticipating poor performance by nickel through the close of 2008. The year has already been rough, with the average prices of Ferro-nickel in the first half plunging 31 per cent to US$12.38 per pound compared to US$17.93 per pound in the same period last year. Weak demand for nickel MNI3, widely used in kitchen appliances and cutlery, has seen prices tumble by around half from the year's high of US$34,700 a tonne hit in early March on the London Metal Exchange. Nickel value on the London Metal Exchange ended down US$705 at US$17,400 a tonne on Tuesday.

Sumitomo Metal Mining ^[3], a leading Japanese smelter, has predicted the waning demand will be responsible for a 26,000 tonne global surplus ^[4] in nickel for 2008. The company does not expect stainless steel demand to recover before 2009 with nickel consumption expected to remain low for the rest of the year.

Despite crashing nickel prices, workers at Vale Inco Ltd's ^[5] Thomson, Manitoba, nickel operations will receive a hike in pay and benefits. The unionized workers voted in favor of a new, three-year contract deal that will see base wages increase by 3 per cent, followed by a further 2.5 per cent increase in 2009, as well as a 2 per cent increase in 2010.The average total increase of the contract, including current cost of living adjustments roll-in, will be 13.7 per cent, and the deal maintains the employees' nickel bonus and provides for a US$4,673 signing bonus for union members. The agreement also contains new provisions, which include pension and insurance improvements, medical emergency financial support and maternity leave.

Indonesian state-owned miner, PT Aneka Tambang Tbk (ATM.AX) is anticipating a jump in coal consumption when it completes a new power plant near its nickel mine in Pomalaa, Sulawesi. The US$350 million coal-fired power plant, due to be built under a joint venture with an independent power producer, will have a 150 megawatt capacity and construction is due to start in 2010, and will take between 18 and 24 months. Falling nickel prices and rising energy costs have prompted cost cuts and increase nickel sales to boost revenue. The new plant should be a step in the right direction.