By Leia Michele Toovey- Exclusive to Nickel Investing News

The industrial metals experienced an early week price lift backed by stock market momentum from China’s stimulus plan. Further impetus to the metals came by way of a pledge by the G20 group to take all necessary measures to get financial markets back on their feet.

A declining greenback made the metals more economical for holders of other currencies.  Short covering as investors who had bet on lower prices bought back their positions helped nickel rise 13 per cent.

On Monday, nickel hit a high of US$12,450 a tonne, up from Friday’s closing bid of $10, 975. Monday’s closing value was $11, 500. On Wednesday, however, the metal was back down to $10,955. Nickel has fallen further below production cost than any other base metal with prices dropping over 50 per cent so far this year.  Nickel’s retreat back to lows mid week, analysts believed, was due to the fact that the slew of good financial news at the beginning of the week overshadowed the metal’s true economic position. 

Goldman Sachs has cut their outlook for nickel, copper and platinum prices. After owners of stockpiled metal sold their assets to raise cash, the investment group is expecting the prices will average less than originally anticipated. The estimate for nickel was cut by 4 per cent to $21,636 a tonne.  

Compared to previous estimates, China’s refined nickel output is forecast to fall nearly 10 per cent to around 130 000 tonnes this year. Major producers are cutting output following a slump in nickel prices after steel mills halted and reduced production in China, the world’s largest stainless steel producer and nickel consumer. Jinchuan Group Ltd, China’s top nickel producer, has cut its production by a third in October and November and may further reduce output next month, as demand weakens. China’s base metals production was expected to slow down, while lower demand had led to profit declines in the industry and the aluminum sector was also suffering losses. State-owned research group Antaike had previously forecast that China’s nickel output would rise 6 per cent to 228 000 tonnes this year. Nickel pig-iron plants would account for 80 000 tonnes and refined metals from smelters, 148 000 tonnes. China produced 103 567 tonnes of refined nickel in the first nine months, up 12 per cent from the same period last year, but output in September fell 16 per cent from a year earlier to 9 491 tonnes. Lower-than-expected production in China, which consumes about a fifth of the world’s nickel used in the production of stainless steel, may lend support to world prices that have halved since the end of 2007 due to slackening demand from end-users and the increasing use of pig iron that contains nickel in China. China is expected to produce 7.8 million tonnes of crude stainless steel in 2008, up just 2 per cent, after growth of 38 per cent last year, a government-run research body forecast in September.

Russia’s nickel exports were up 0.7 per cent in the first nine months of 2008, compared to the same period in 2007. However, due to nickel’s price collapse the amount of money earned by the exports is down. The exported nickel was worth $4.152 billion compared with $6.575 billion a year earlier. Nickel exports to countries outside the Commonwealth of Independent States totaled 181,000 tonnes worth $4.136 billion compared with 179,700 tonnes worth $6.552 billion.

Anglo American has secured a US$644-million loan from the Brazilian Development Bank to help fund its nickel production in Brazil. The financing from the Brazilian bank represents 46.4 per cent of the total $1.42-billion investment Anglo American is making in Barro Alto nickel project in the central state of Goias. Financing will be used for the expansion of nickel production and in the construction of a processing centre at Barro Alto. The centre will process 36 000 tonnes of nickel a year and is expected to be in operation in 2010.

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