By Leia Michele Toovey- Exclusive to Nickel Investing News

Nickel companies are struggling to cope with dropping metal prices. On Wednesday, nickel prices were hammered again in a broader sell off triggered by demand worries. Nickel prices sunk as low as $10,000 per tonne by mid day after closing Tuesday at $10,700 per tonne on the LME. With average production costs of nickel estimated at $10,500- $11,000 per tonne. At this price many nickel companies are losing money.

LME nickel stocks are standing at over 55,470 tonnes, near the highest level they have been since 1999, suggesting that the industry is currently plagued with a surplus. This theoretical surplus is despite the fact that Cuban nickel operations are still only running at 81 per cent capacity in the wake of hurricane Ike. Tough economic times that started in America in 2007, and have been spreading around the globe in 2008 are largely to blame for nickel’s decent.  But before the drop, many companies gave new developments the green-light in an attempt to keep up with high demand and record prices. Faced with the changing climate, many mines have temporarily shut production (this is often the case with larger miners), or have let workers go (the case with small cap companies).

First Nickel Inc. (TSX: FNI) will close its Lockerby mine located near Sudbury Ontario for a “care and maintenance program.”  The current financial climate coupled with nickel’s price decline is the real reason behind this closure that will cost 150 people their jobs.  This announcement came out on Sunday afternoon, and by Monday shares in the company shed more than a third of their value. The decision followed an extensive evaluation of mining scenarios and likely near-term metal price projections. That review ruled out the continuation of operations at the mine near Sudbury, the company said in a release. The mine swill be kept in ready condition through the care and maintenance program that will enable a quick return to production should conditions improve.  

So, how are the Industry’s giants holding up?

The world’s number four stainless steel producer, Posco, reported to press on Wednesday that it would hoist its ongoing production cut to 30 per cent in the fourth quarter in a bid to support prices.  Posco initially cut production in the third quarter by 17 per cent as dropping nickel prices made their mark on the stainless steel market. Nickel MN13, a key ingredient in rust proof steel productions, has dropped 70 per cent since March- putting stainless steel prices under pressure. Stainless prices have lost 20 per cent of their value in the second quarter alone, as demand across the globe fell.

BHP Billiton (BHP.AX) expects economic volatility to continue for sometime, but is confident in the long term demand for its products. The company has no intentions of reviewing their near term projects and capital expenditures despite weak base metal prices. BHP Billiton Ltd (BHP.AX) shut down its 100,000 ton per year Kalgoorlie smelter for four months of repairs during the summer.

Xstrata (XTA.L) sees its finances as robust; the company recently agreed to a three year term $5 billion loan. The company said third-quarter copper output fell 8.3 per cent to 234,615 metric tons after maintenance and shutdowns at the Collahuasi mine in Chile and as less metal was recovered at Alumbrera in Argentina. Nickel output rose 17 per cent to 13,620 tons even after a four-month shutdown at its Falcondo nickel operations in the Dominican Republic, announced in August.  Xstrata’s shares are down 70 per cent this year.

Freeport McMoran’s CEO said his company is “trying to preserve its balance sheet in a tie of lower prices.” Norilsk Nickel’s CFO has claimed that the company will revisit its 2009 investment program due to the current economy.