Economist sees nickel demand improving as year ends

Forecast requires a late-year pickup in stainless steelmaking

By Tom Stundza -- Purchasing, 9/24/2008 9:51:00 AM

Flagging nickel demand should pick up slightly by the end of 2008, senior economist David Wilson of producer Norilsk Nickel tells a recent metals conference in London sponsored by consultancy GFMS Ltd. But, he admits this probably won’t force a rebound in nickel’s price since the demand bump will be marginal against this year’s global production increases.

A story in the Platt’s Daily Metals Report subscription newslettersays the level of demand growth and supply expansion remains under debate by Wilson and other market observers. But what is undeniable is that previous-year price explosions in nickel and continued volatility this year, even as 2008 prices are sliding, “have impacted the market in a number of ways.”

The economist points out that stainless steel producers, the biggest consumers of nickel, have expanded use of nickel-bearing scrap or secondary smelted nickel instead of the primary metal. Atop that, stainless steel crude steel production decreased in the first half of 2008 by 1.8% compared with the same period of 2007, according to statistics from the International Stainless Steel Forum (ISSF).

All stainless steel producing-countries reduced their first-half 2008 production except for China, where smelting expanded by 10%. Elsewhere, the ISSF says “the rates of decrease range between 6% and 13% for other individual countries.” So, looking at the world market strategically, Wilson says that China, which is not rich in nickel resources, is expected to continue to be the main driver behind nickel demand. Western demand probably will remain weaker because production costs will continue to rise on the back of increasing fuel prices and because end-use growth trends are uncertain.