Nickel prices likely to Drop in 2008 due to expected surplus
Analysts at ABN Amro bank in London see nickel prices unwinding after a blistering rally that started in 2001, with the market staying in surplus around 100,000 tonnes. Despite relentless Chinese stainless steel production growth, the rest of the world is looking to reduce production of SS in 2008. The slippage in prices began at midyear when stainless steel producers slowed purchases had not been as strong worldwide as had been projected and nickel inventories had been overbuilt.
The International Nickel Study Group has forecast that the world market for nickel is expected to be in a 120,000 tonne surplus in 2007 and that the glut is expected to slide during 2008 to feed China's stainless steel industry but only to 100,000 tonnes. The International Nickel Study Group also suggested that world primary refined nickel production is estimated to increase to 1.47 million tons in 2007 and is forecast at 1.57 million tons in 2008. Meanwhile, world primary nickel usage is estimated to decrease to 1.35 million tonnes in 2007 and is forecast at 1.47 million tonnes in 2008.
Ms Rebecca McCallum analyst at the Australian Bureau of Agricultural and Resource Economics said that "Some stainless steel producers began to delay their purchases of nickel this past summer in the expectation that prices would continue to fall. The lower nickel price reflects an increase in world stocks as supply growth exceeds demand growth. However, nickel prices are forecast to remain high historically as demand for stainless steel remains strong in the area of 16 million metric tons worldwide.”
According to various new forecasts, the slippage in economic growth in North America and Western Europe in 2008 and possible cutbacks in stainless steel output in China to cool an overheated metals economy may cut nickel prices by as much as 25%.
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