World nickel prices predicted to peak in 1998

World nickel prices predicted to peak in 1998

BANGKOK (Reuter): Nickel is set to ride booming demand for stainless steel and prices will likely peak around 1998, an analyst with the London-based Commodity Research Unit (CRU) International Ltd said yesterday.

After 1998, more major nickel mining projects will come on stream and prices will slide, the firm's research manager on special steel and alloys, Fidelis Madavo, told Reuters.

"The price could peak to as high as US$5.00 per lb even before 1998," he said. Nickel currently trades at around US$3.40 per pound in the cash market.

The stainless steel industry accounts for about two thirds of global nickel consumption.

Madavo was in Bangkok for a two-day International Stainless Steel Conference organized by Metal Bulletin.

Madavo predicted that stainless steel demand would pick up from 1997 to 1998 after a de-stocking phase in 1996 ended. That would lead to a boost in demand for nickel.

"While we agree that the market looks weak in 1996, we are still of the opinion that the underlying causes of that are largely related to stock changes and the timing of the business cycle, rather than a shift in consumer preferences," he said.

CRU believed that the annual growth rate in apparent consumption of stainless steel finished products for the western world would continue at around 4.5 percent well into the next century, he said.

While demand for nickel was bound to rise, he said supply would remain tight.

"Although the slowdown in demand for primary nickel so far in 1996 has taken the heat off a little, the tightness is expected to persist at least up to 1998," he added.

However, the situation would change once various nickel projects came on stream after 1998. New supplies coming from them would redress the imbalance from 1999 onwards, he added.

"Clearly, we would expect prices to fall quickly from the 1998 peaks. Prices of below $3.00 per pound are possible by 2002- 2003," he said.

The biggest new project coming up was the Voisey's Bay project run by Diamond Fields Resources Inc in Labrador, Canada. Production was expected to start in 1999 and rise to a maximum production of 122,500 tons per year by 2000.

There were also other new projects or expansions in South Africa, Brazil and Venezuela, Madavo said.