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Crisis hits nickel demand hardest

Article from: The Australian

NICKEL has been hit hard, with a long list of miners shutting down production in 2008 as prices probe record lows.

In its commodities outlook for 2009, published this week, Goldman Sachs said it expected the nickel market to be in surplus throughout its forecast period.

"Despite a brutal de-stocking in the second half of 2007 and throughout 2008, the prospects for nickel demand remain sluggish," analyst Malcolm Southwood said.

London Metal Exchange nickel fell to a low of $US11,100 a tonne yesterday. The metal had rallied as much as 16 per cent since the start of 2009 and hit a two-month high of $US13,550 this week, but it closed at $US11,545 a tonne, down from $US12,300.

Nickel prices dropped more than 50 per cent in 2008 and LME warehouse stocks fell 108 tonnes to 78,804 tonnes, but are still close to their highest level since July 1995.

Despite a small rally in the past week, there had not been any turnaround from stainless steel manufacturers, one analyst said.

"Any rally is premature and we are forecasting the first quarter to be very weak across the base metal sectors," he said.

"Nickel is the most leveraged to economic activity. When the stainless steel industry is doing well, the economic prospects are good, but it is equally bad when the outlook is poor."

Mincor Resources, Australia's third-largest nickel producer, has shut its Miitel mine. Mining giant Xstrata has cut its nickel production, Consolidated Minerals has axed staff at its Kambalda nickel mine and Minara Resources laid off 200 workers at its Murrin Murrin mine in July, shelving a $300 million expansion.

Norilsk Nickel has put its Waterloo and Silver Swan nickel mines in Western Australia into care and maintenance. Its Cawse nickel laterite operation in the same region was suspended indefinitely in October after being shut in June.