Nickel’s plummet from all time highs may actually work out in the end to benefit the metal. The hunt for effective substitutes for nickel in making stainless steel may have slowed down after nickel prices tumbled around 80 per cent in less than two years. While this will not mean the end of the search for a replacement, it marks a delay in finding a suitable alternative for the alloying metal.
Stainless steel producers use about two-thirds of global nickel supplies, as the alloy contains up to 9 per cent nickel. Steelmakers once led the search for nickel substitutes and saw sales of high-nickel-bearing grades of stainless steel drop in mid-2007, when nickel prices on the London Metal Exchange peaked above $50,000 a tonne. But as nickel prices plunged in the midst of the economic crisis, steelmakers have put off their quest for substitutes.
In the meantime, it is going to take time for the nickel industry to adjust to the current economy. The global nickel market will be in an 80,000 tonnes surplus in 2009, as falling demand continues to outpace cutbacks made by producers, the International Nickel Study Group (INSG) said. The Lisbon-based group said it expected world production to fall to 1.26 million tonnes this year and consumption to 1.18 million tonnes. In October, the group predicted an 110,000 tonne surplus; since then a swathe of producers have announced cutbacks in response to poor demand. The group said primary nickel output last year was 1.39 million tonnes, down from 1.42 million in 2007. Global primary nickel usage was 1.29 million in 2008, compared with 1.31 million tonnes in 2007.
Leading stainless steel producers in Taiwan have reported substantially improved sales this month, kindling hopes that the market has at least touched bottom. Yieh United Steel Corp in Kaohsiung County, the largest integrated stainless steel mill in Southeast Asia, indicated that thanks to rising international nickel prices, its stainless steel supply this month is expected to reach 70,000 tonnes. The estimated volume for this month is a significant increase from the historical monthly lows of 40,000 tonnes in January and February and around 60,000 tonnes last month, the mill said. Tang Eng Iron Works Co in Kaohsiung, a specialized producer of stainless steel with an annual capacity of 260,000 tonnes, also reported that its capacity utilization rate has increased from 20 per cent in February to 80 per cent this month, with total production this month estimated to triple to 24,000 tonnes from the monthly average of the first quarter. Producers believe that as long as nickel prices remain above $10,000 per tonne, their monthly revenues in the second quarter would continue to recover.
Indonesian nickel producer PT Aneka Tambang (ANTM.JK) is bringing forward repairs on a nickel smelter in expectation of higher prices, Antam said in a press statement Tuesday. The FeNi III smelter should reach its maximum capacity at the end of the year. The company said fine-tuning of the ferronickel smelter will now begin in May, rather than in July as earlier planned, due to the expectation that nickel prices will improve by the end of 2009. Antam has kept its nickel production target for 2009 unchanged at 12,000 tonnes. In March, Antam cut its planned output for 2009 by 23% compared with 2008.
Sherritt International Corporation (TSX:S) posted a first-quarter loss on Wednesday after taking a hit on an asset sale and plunging nickel, cobalt and oil prices. Sherritt, whose main assets are oil and nickel holdings in Cuba and Madagascar, said it lost C$42.9 million, or 15 Canadian cents a share, in the quarter ended March 31. That compares with a profit of C$89 million, or 38 Canadian cents, in the year-before quarter. Excluding an after-tax loss of C$57.4 million, or 20 Canadian cents a share, on the disposal of some oil and gas assets, Sherritt said it earned C$14.5 million, or 5 Canadian cents a share. Analysts had expected, on average, a profit of 1 Canadian cent a share, before exceptional items, on revenue of C$244 million. The company said revenue rose 11 per cent to $349 million. Shares rose as much as 6 per cent in opening trade before edging back to a gain of 16 Canadian cents, or 3 per cent, at C$5.09 on the TSX on Wednesday.