By Leia Michele Toovey- Exclusive to Nickel Investing News
Nickel will average 6 per cent higher in the fourth quarter than previously forecast after a strike at Vale will reign in supply. Vale workers at the Sudbury nickel operations in Canada are on strike as they are hard- balling management for a change in benefits structure. Vale is already struggling to cope with nickel’s ubiquitous price drop, and CEO Roger Agnelli told media on July 7th that Sudbury was “not sustainable” and Vale won’t yield to union demands.
The strike began July 13 after workers rejected Vale’s proposals for Sudbury’s retirement benefits to be contribution-based, rather than benefit-based. The United Steelworkers’ Union, which represents about 3,100 of Sudbury’s workforce of 5,000, “remains poised” to also go on strike at Vale’s Voisey’s Bay nickel operations in Newfoundland from Aug. 1, McPhee added.
The strike is expected to drive the price of nickel for immediate delivery up to an average of $15,015 a metric tonne in the final three months this year, up from a previous forecast of $14,155 a tonne, according to CPM analyst Catherine Virga. CPM also raised its copper, lead, aluminum and zinc forecasts and lowered its estimate for tin, Virga said.
Nickel prices leapt as high as $17,200 a tonne yesterday. The metal has already gained 47 per cent since May 11, when it was trading for $11,700 per tonne. According to Tony Rizzuto, a New York-based analyst with Dahlman Rose & Co., nickel prices have strengthened in part because of the strike at Sudbury. “The strike is likely to be a longer-term situation — it’s difficult to see how they will break the union,” Rizzuto said in a phone interview. “There’s been a history of strikes at Sudbury and this one could be in excess of 90 days.”
Nickel stocks have remained high in the first half, represented by about 16 weeks of consumption, compared with so called “normal” levels of eight weeks.
PT International Nickel Indonesia, announced on Thursday that moving forward it would improve efficiency after posting an 89 per cent plunge in second-quarter net profit due to lower prices and weak demand in the economic slowdown. Brazil’s Vale Inco Ltd, which owns 60.8 per cent of Inco, said earlier this week that it planned to cut 87 jobs, almost 3 per cent of its workforce, as part of efforts to cut costs in response to the global crisis. It had also revised down its capital expenditure budget for this year by more than a quarter. Inco said its average realized price slumped 60 per cent to $8,894 per metric tonne in the second quarter, from $22,477 a year ago. Inco produced 16,300 metric tonnes of nickel in matte in April-June, down 4.2 per cent from 17,015 metric tonnes a year ago.
French miner Eramet is anticipating an operating loss for the second half of 2009, after reporting a heavy loss for the first half of the year. The world’s sixth-largest nickel producer made an operating loss of 223 million euros in the first half, after it had warned of a “very significant” loss, and compared to the year-earlier operating profit of 769 million euros.
First-half sales fell 44 per cent to 1.292 billion euros, although the decline eased in the second quarter due to some improvement in nickel prices and manganese volumes. The group plans to cut costs by 140 million euros this year, and also said it would pursue savings in its nickel mining operations to bring costs into line with competitors by 2012.
Russian aluminum giant Rusal has agreed on restructuring terms on $7.4 billion in debt with a committee of international lenders. Rusal has agreed on the principal terms of a long-term debt restructuring with the Coordinating Committee which represents more than 70 international lenders,” the company said in a statement.
“The agreement puts Rusal on a strong and stable financial footing and ensures that the business is capable of weathering the current economic environment.” The deal is still subject to approval by the banks’ credit committee, and if approved Rusal will pay off its debt within seven years.