Citigroup slashes 2009 nickel price forecast on lower demand

Bloomberg reported that Citigroup Inc has slashed its 2009 nickel price forecast by 40% as new mines will open when demand from stainless steelmakers drop.

Analysts Mr Alan Heap and Mr Alex Tonks said that the price may average USD 6 a pound in 2009, down from an earlier estimate of USD 10 a pound. A global surplus will widen by almost 5 times in the next 2 years.

They added that "Demand is under continued pressure from substitution, in particular, substitution of high nickel stainless alloys with ferritic alloys of a lower nickel content or no nickel at all.''

Citigroup said that nickel production in 2008 will exceed consumption by about 10,500 tonnes. It added that the surplus will widen to 42,500 tonnes in 2009 and 51,000 tonnes in 2010 on new supply from Cia Vale do Rio Doce's Goro project and Onca Puma mine and BHP Billiton Limited's Ravensthorpe project.

China's Special Steel Enterprises Association said last week that Shanxi Taigang Stainless Steel Co and Baoshan Iron & Steel Co are making ferritic products to replace more than 40% of their 300 series products. Ferritic products contain little nickel compared with the 300 series products, which typically contain 8% nickel.