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Global nickel mart facing return to deficit after 2015

Keywords: Tags  nickel, surplus, Norilsk Nickel, Dmitry Kuznetsov, Eramet, Jerome Baudelet, Macquarie, Jim Lennon

TORONTO — The global nickel market should move back into a supply deficit after 2015 due to a lack of new mining projects coming online, attendees at the International Nickel Conference of AMM sister publication Metal Bulletin were told.

Dmitry Kuznetsov, chief analyst at Russia’s MMC Norilsk Nickel, estimated the global nickel surplus at 72,000 tonnes this year, with the trend likely to tail off in the third and fourth quarters.

Nickel consumption in the Americas will increase by 3,000 tonnes to 183,000 tonnes in 2013, with China accounting for 47 percent of that total, he said at the Toronto event.

"That growth is continuing and continuing and continuing, and hopefully will not end," Kuznetsov said.

However, Jerome Baudelet, market research analyst at France’s Eramet SA, estimated the surplus at only 48,000 tonnes in 2013, down from 71,000 tonnes in 2012.

London Metal Exchange stocks will total 14.3 weeks’ of consumption in 2013, which is "not as bad as it looks," he said.

"Some stocks are in warehouses where you can’t get them out. There is high inventory, but not everything is readily available," Baudelet said. "Not one of my customers are carrying more than one week of inventory."

Inventories in LME-listed warehouses totaled 175,566 tonnes April 25 with facilities in Rotterdam, the Netherlands, holding over 71,000 tonnes and those in Johor, Malaysia, holding more than 46,000 tonnes.

The global supply picture is also likely to change in a matter of years, Baudelet said.

"After a wave of new production projects coming online up to 2015, there is nothing coming. So there is a potential deficit of supply," he said.

Such a deficit is likely to give strong support to pricing, Macquarie Bank Ltd. head of commodities research Jim Lennon said.

"Growing deficits by mid-decade will lead to a need for new capacity, which could push prices above $10 per pound," he said.

The London Metal Exchange’s three-month nickel price closed the official session at $15,255 per tonne ($6.92 per pound) April 30.

While the cyclical nature of the industry means that the current lull in pricing is unlikely to continue for the long term, Baudelet estimated that one-third of nickel produced at current LME prices is sold at a loss or break-even level.

He also noted that the stainless steel industry is experiencing a global surplus of capacity, estimated at 17.2 million tonnes in 2012.

"One of our major concerns as a producer is that we are supplying an industry in overcapacity and losing money," Baudelet said.

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