22/10/2008 - 14:02

Nickel prices to rebound: analyst

22/10/2008 - 14:02

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A key market analyst says a realistic outlook for nickel prices over the next few years is around $US17,000 per tonne and producers should take heart from an expected doubling in demand over current levels by 2030.

A key market analyst says a realistic outlook for nickel prices over the next few years is around $US17,000 per tonne and producers should take heart from an expected doubling in demand over current levels by 2030.

Addressing delegates at a nickel conference in Perth today, Alto Capital Research Analyst Carey Smith said the high nickel prices of 2006 and 2007 "are gone".

"The price collapse has gone from an average for the 2007 full year of $US38,023 per tonne to a current price of $US10,155 per tonne," Mr Smith said.

"The outlook going forward will be that the junior end of the market is going to struggle over the next couple of years with little or no capital available to conduct exploration let alone project development," Mr Smith said.

"Only the most financially sound laterite projects will get off the ground - and that demands an average grade of at least 1.5% nickel or higher. Numerous nickel mines are expected to shut down globally as profits turn to losses."

On the supply and demand side, Mr Smith said the high 2006 and 2007 prices had fed a production increase of lesser quality stainless steels (nickel is a key stainless steel component) but the resultant over-supply had generated the price slide.

"However, supply is now falling dramatically as high cost producers struggle to survive the current low price nickel environment and so the forward long-term outlook is not all bad news.

"Although there will be bumps in the road, demand for commodites will continue to increase over coming decades.

"Alto Capital expects nickel demand to increase over the next 10 years with demand likely to double the current level of 1.4 million tonnes a year, by 2030.

"In addition, as commodities are consumed, it is getting increasingly difficult to replace the depleted resources at a reasonable price and add to this increasing demand from China, India and the rest of Asia.

"As a result, nickel prices in three years time will be substantially higher than present but unlikely to reach the levels of 2007."

The positive outlook for the nickel price was echoed by Western Areas NL managing director Julian Hanna, who expects the nickel price to bounce back early next year.

"I see the current collapsed nickel price, down to around US$4.70 a pound, as a real anomaly," Mr Hanna said.

"The 'happy zone' for the nickel price is between US$10-15 a pound. We regard US$8 a pound as to where it starts to negatively impact production and while it has headed below that recently, we expect it to return to sensible levels from early 2009."

 

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