By Leia Michele Toovey-Exclusive to Nickel Investing News

Nickel prices will most likely be flat, at best, in 2009, according to Robin Bhar, metals analyst for Calyon Credit Agricole CIB, London.  However, nickel premiums are difficult to gauge in a market characterized by a lack of demand, rising stocks and sinking prices.

LME nickel prices have fallen by around 80 per cent from their record high near $50,000 per tonne, hit in May 2007. Macquarie Bank forecasts nickel to average around $11,023 in 2009, and Standard Chartered forecasts it to average $10,075. Roughly 18 per cent of world nickel supply was cut in the later part of 2008; these cuts, however, have done little to stabilize the downward pressure exerted by collapsing demand. The light at the end of the tunnel for nickel is the potential for planned government stimulus packages expected to start taking effect later in ’09 to boost demand. Macquarie Bank says that it may take until the end of 2009 for production cuts and dropping demand to reach a happy medium.

This week, nickel was given a jolt on the MCX as the UPA government announced excise duty cuts on steel. MCX Nickel is at Rs 497 per kg levels up Rs 3 after closing at Rs 494 per kg on Tuesday. LME Inventories have risen 17,274 tonnes so far in 2009.

Company News

Mitsubishi Corp will take a 33.4 per cent stake in Indonesian nickel developer Strant Minerals from French nickel and manganese group Eramet SA (ERMT.PA) for $145 million. The French company will hold on to the remaining 66.6 per cent. Mitsubishi and Eramet will jointly conduct a feasibility study on the development of the Weda Bay nickel deposit in Halmahera, Indonesia. According to Mitsubishi, the deposit is one of the world’s largest undeveloped nickel projects. The two firms aim for annual production of up to 65,000 tonnes from the mine, which is estimated to contain 5.1 million tonnes of nickel ore resources

The Indonesian unit of Rio Tinto Ltd/Plc remains committed to a $2 billion nickel project in Indonesia’s Sulawesi Island, although is waiting for more clarity under a new mining law. “At this stage, we have no intention of pulling out of the project,” Mark Hunter, executive manager of projects at PT Rio Tinto Indonesia, told reporters. “Once we see the implementing regulation, we will then review the project,” he said. Indonesia passed a new mining law in December of 2008 under which the current licensing of a contract of work, favoured by major mining firms, has been replaced by mining permits running for shorter periods. Rio Tinto previously applied for a contract of work, but under the new law, can continue the project with a mining permit. The firm also does not have to go through a tender process, although the government is currently drafting new regulations and has said new permits would not be approved until this was done. Rio Tinto has said it plans to spend up to $2 billion on the Central Sulawesi project, which is estimated to have a capacity to produce 46,000 tonnes of nickel metal a year.

Sherritt International (TSX.S) reported a fourth-quarter loss on Wednesday. The miner and energy producer said it lost C$592 million,or C$2.03 a share, in the quarter, compared with a profit of C$83.5 million, or C$0.36 a share, a year earlier. The latest results include after-tax charges totaling C$571 million, or C$1.96 per share, with C$463 million related to Ambatovy, which is now under review. Excluding the charges, Sherritt said it lost C$20.8 million, or C$0.07 a share.
PT International Nickel Indonesia Tbk has posted its first quarterly loss since 2003. Inco, as the company is known, booked a loss of $9.8 million in the three months that ended on Dec. 31 compared with profit of $200.5 million a year earlier. Sales declined to $180 million from $458.5 million.  Full-year profit dropped to $359.3 million from $1.17 billion as sales declined 44 per cent to $1.31 billion. Output in 2008 fell to 72,400 metric tonnes, lower than an initial forecast range of 77,000 to 79,000 tonnes for the year, and also lower than the 76,700 tonnes produced in 2007. Inco anticipates as much as a 20 per cent production decrease going forward as it turns off thermal power generators, which use coal, to use hydropower generation to cut costs.

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