By Leia Michele Toovey- Exclusive to Nickel Investing News

The price of nickel has been on a downward spiral since it touched a high of US$51,800 per tonne in May 2007. 

Currently, the metal has been operating in the US$12,400 range, and further declines are expected.  Analysts predict that as the financial crisis spreads, nickel could dive as low as US$10,000 per tonne.

While the U.S. presidential race was coming to a close, early morning trading on India’s Multi Commodity Exchange (MCX) was underway. Nickel futures dropped sharply with the November 2008 contract opening at Rs 605 per kg compared to its earlier closing of Rs 612.10.  The contract oscillated between Rs 584.10 to Rs 605, and was last traded at Rs 592.40. Nickel December 2008 contract opened at Rs 611 per kg as compared to its previous closing of Rs 625.70. Nickel January 2009 contract fell 3.02 per cent at Rs 614 per kg as compared to its previous closing of Rs 633.10.

On the London Metal Exchange (LME), the week started strong with London nickel futures rallying alongside the other base metals, gaining 7 per cent. Nickel for delivery in three months on the LME rose 6.8 per cent to US$12,925 a tonne, while copper rose more than 2 per cent, after huge losses in October. Wednesday’s LME trading closed at US$12,050 for three month delivery.

Company news

After State Bank VEB agreed to refinance United Company Rusal’s $4.5 billion loan, Rusal will see two new government agents join its management team.  Rusal originally took the loan to help finance its acquisition of a stake in Norilsk Nickel. Since then, the two companies have been battling over control of Norilsk. The two government representatives would also join the management team at Norilsk, the world’s largest nickel miner. The agents will be part of Norilsk’s enlarged board to ensure that the company is operating in best interests of the creditor.  This is a huge milestone for Rusal, who has been pushing for an enlarged Norilsk board since Norilsk has readjusted the control of their company into fewer hands. Rusal has accused the Norilsk board of collusion and acting without the interests of all shareholders in mind.  The addition of government agents to the board is anticipated to increase the impartiality of the company’s future business decisions.

VEB has been entrusted by the government to disburse $50 billion by the end of 2009 to help Russian companies refinance $120 billion in Western loans as the global liquidity squeeze shuts off foreign lenders. UC RUSAL, majority owned by billionaire Oleg Deripaska, is among the first companies to benefit from the rescue package. The loan has been provided for one year, with an option to extend at the discretion of the bank’s advisory council.

POSCO has launched a new smelting plant that will help the number 4 steel maker secure a stable supply of raw materials. POSCO expects to obtain half its annual nickel needs from the project for the next 30 years, with the new plant replacing $500 million worth of  nickel imports. POSCO set up the plant with 30,000 tonnes of annual production capacity in its Gwangyang steel complex in South Korea after it signed a deal in 2006 with New Caledonia nickel miner SMSP for a joint nickel mining and smelting. The production comes at a time of high nickel inventories, chronic price weakness and no prospect of short-term consumption recovery, pushing the market to below break-even level for some miners.

The ability of POSCO to receive a stable supply of nickel from its own plant will aid the company during this difficult time by reducing stainless steel production costs.

Japan’s largest nickel producer, Sumitomo Metal Mining Co. may delay the start of its Taganito nickel project in the Philippines to explore the possibility of cutting project costs. The company had planned to start construction of a 30,000 tonne-a-year nickel plant together with Manila-based Taganito Mining Corp in 2009 after completing a feasibility study by the fall of this year. The plant was to start operations in 2012. Speaking in a news conference, president of Sumitomo Nobumasa Kemori stated “We will spend more time on the feasibility study so that we’ll be able to obtain better terms and conditions on materials and various other contracts. Sumitomo Metal has no plan to abandon its growth strategy and will stick to its midterm plan to nearly double its nickel output capacity to 100,000 tonnes a year by 2013.”