By Leia Michele Toovey- Exclusive to Nickel Investing News
Under the weight of high inventories, nickel is anticipated to be one of the slowest industrial metals to rebound.
LME stocks of nickel are at their highest since around mid-1995. The world refined nickel market was in surplus by 42,900 metric tonnes in January-November of 2008, despite a drop in production; mine production in the period was 1.4124 million tonnes, down 1.6 per cent from the same period of 2007. Output reduction in Japan and China decreased production by 6.1 per cent. World demand was down 1.9 per cent from the same period of the previous year. Nickel supply has outpaced demand every month since February 2007, when the market had a deficit of 4,600 metric tonnes. The metal used to make stainless steel dropped 56 per cent last year on the London Metal Exchange.
Nickel futures rose by 2.89 per cent in futures trading Wednesday, driven by pick-up in demand in the spot markets, and increased purchases by stainless steel makers. Nickel for the most-active March contract gained 2.89 per cent on India’s MCX. The contract recorded a business volume of five lots. For January and February contracts, nickel was higher by 0.84 and 0.83 percent at Rs 552.90 per kg and Rs 559.00 per kg, respectively. The business volume for January was at 587 lots and February was at 105 lots.
Russian Prime Minister Vladimir Putin signed an order on Wednesday to abolish export tariffs of 5 per cent on nickel and 10 per cent on copper cathode. The removal of the tariffs, a boost to leading Russian miner Norilsk Nickel, will come into force seven days from the publication of the order in the government gazette. At the end of December, the government’s Commission for Protective Measures in Foreign Trade, responsible for drafting government orders on customs tariffs, recommended that the tariffs on nickel and refined copper be scrapped.
Anglo American Plc has temporarily halted production at its biggest nickel mine in Venezuela. High transport costs and low nickel prices have forced the mine into unprofitable territory. Anglo owns 91.4 per cent of the operation, which produced 15,700 tonnes in 2007, accounting for 60 per cent of the firm’s total nickel output. It is located 80 km southwest of Caracas. Anglo estimated cash costs in 2008 at Loma were just above $5 per lb, but said that was not representative since the mine had been hit by a strike and production difficulties.
BHP Billiton announced the closure its Ravensthorpe nickel mine in Western Australia. The closure came just days after media speculation predicted the mine’s curtailment. The mine only opened last may, but low nickel prices eroded its profitability. The winding down of the mine and its facilities will result in 1,800 layoffs will produce another $400 million charge for BHP in the second half 2009. Based on those numbers, the shuttering of the enterprises will cost the mining firm at least $3.7 billion in total. The decision to open the Ravensthorpe mine has been regarded as the worst business decision made by the company’s current management.
Vale, the world’s second-biggest nickel miner, may announce further cuts to its Canadian nickel operations to contend with falling demand and to pressure workers into contract negotiations. Vale is set to start talks with its Sudbury, Ontario, workers in April, before a planned maintenance shutdown in May. Vale may seek to extend the shutdown to cut inventories while rescinding some worker perks. The company announced last month a suspension of some Canadian nickel output because of falling demand amid the global slowdown. In January, output was halved at the Copper Cliff South mine, which produces 8,000 tons of nickel a year in the Sudbury area.