Nickel

By Leia Michele Toovey-Exclusive to Nickel Investing News

Nickel was one of the worst performing commodities last year, sinking from more than US $33,000 a tonne in March to below US $9,000 in October due to lower demand from steel makers.

Late in the year, the industry was hit with a bunch of cutbacks- cutbacks that the industry has yet to feel the full affects of.

Despite weak fundamentals, nickel has kicked off 2009 with a rapid upswing in value. In just 3 days, nickel gained approximately 40 per cent on a buying spree that followed the annual reweighting of the commodity indexes.  Analysts were cautious, though stating that nickel could just as quickly reverse direction and the metal could fall back to its pre-Chrismas value. For the long term view, optimism reigns as analysts claim demand has hit the bottom; and a rebound can be expected later in the year.  Standard Chartered Bank is anticipating the price of nickel to stay around $12,400 through 2009. Goldman Sachs published in its commodiites outlook for 2009 that it expects nickel’s price to be affected by the fact that the market will likely be in a surplus for the year.

London Metal Exchange nickel fell to a low of $US11,100 a tonne yesterday. The metal had rallied as much as 16 per cent since the start of 2009 and hit a two-month high of $US13,550 this week, but it closed at $US11,545 a tonne, down from $US12,300.

Despite a small rally in the past week, there had not been any turnaround from stainless steel manufacturers, one analyst said. Nickel is leveraged to stainless steel industry’s activity. When the stainless steel industry is doing well, the economic prospects are good, but it is equally bad when the outlook is poor. An improvement in stainless steel demand is unlikely any time this year. N.C. Mathur, President of Indian Stainless Steel Development Association, says that India is expected to see a 20 per cent to 25 per cent drop in exports of flat and long stainless steel products in the fiscal year to March 31, 2009, due to rising competition and slowing consumption. “Most of the local stainless steel companies are operating at 60 per cent to 70 per cent capacity in the October to December 2008 quarter.” He added that overall production, however, is expected to be marginally lower in the year to March 31st 2009 or at the same level as 2007-08. “But with export markets shrinking, there is a possibility India could turn into a net importer through increased imports of low nickel content steel. The imports are rising due to overcapacity in China, Taiwan and Europe.”

As the LME nickel price rose dramatically in the start of 2009, the price of cold rolled stainless steel plate in Asia followed suit. The nickel price stood at US$6 per pound on January 6th 2009 while only US$ 4.3 to US$ 4.4 per pound on December 23, 2008. With the rising nickel price, many steel producers plan to lift the price of cold rolled stainless steel plate on the domestic market.In America, stainless steel purchasing dropped 9 per cent to 108 million net tonnes in 2008, and now, the analysts at Fitch Ratings forecast at least another 5 per cent decline in buying in 2009 to 103 million.

Company news

Mirabela Nickel Ltd (ASX: MNB) says a lift in the nickel price last week may explain a recent surge in its share price. Mirabela shares were up 35 cents or 38.89 per cent at $1.25 on Monday after closing at 90 cents, up 5.26 per cent, on Friday. The price of nickel for three month delivery on the London Metal Exchange (LME) jumped 15.8 per cent to US$13,500 per tonne on Friday, while the settlement price was US$12, 710 a tonne. Mirabela said on Monday that it was making good progress in finalizing its senior debt financing arrangements for its large Santa Rita project in Brazil. The company is aiming to secure these financing commitments by the end of January.

Mincor Resources (ASX: MCR), Australia’s third-largest nickel producer, has recently shut its Miitel mine. Minara Resources laid off 200 workers at its Murrin Murrin mine in July, shelving a $300 million expansion.

Norilsk Nickel has put its Waterloo and Silver Swan nickel mines in Western Australia into care and maintenance. Its Cawse nickel laterite operation in the same region was suspended indefinitely in October after being shut in June.