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| General Review Of Nickel In 2004 And Its Outlook For New Year (1) |
| = Recorded Highest Price Since 1988, Nickel Price In 2005 Seems To Have Wide Fluctuations |
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LME nickel price averaged for movements in 2004 was US$6.273 per lb. ( US$13,830.26 per ton ) for settlement, which exceeded the highest price ( US$6.255 per lb. ) recorded in 1988 and renewed the highest one after an interval of 16 years. However, a balance on supply and demand of nickel in 2004 finally came to a short supply of only 5,000 tons. The year of 2004 was deeply impressed by that nickel was a very moody commodity and organized funds were so active on nickel speculation. The highest price of LME nickel recorded in 1988 was due to a bottleneck of the supply side caused by accidents of facilities for nickel production, strike at a major nickel producer and so on, but that in 2004 was based on an expansion of the nickel demand. The background of a short supply in 2004 was an enlargement of the nickel demand in the world arisen from the increased production of stainless steel in China and so on. Needless to say, it was not negligible that the strike at Sudbury Division of Falconbridge in Canada gone on from the 1st February of 2004 became a stimulative factor to accelerate purchases of nickel on speculation. The strike at Sudbury Division continued for 22 days and was called off by the 22nd February of 2004, resulting in a reduction of nickel production by only 3,000 tons. A short supply of nickel in 2004 was carried over by a tightness on the supply in 2003. A deficit of nickel was estimated at 30,000 - 40,000 tons on the beginning of 2004 but revised considerably in autumn. Inco of Canada estimated at a deficit of 19,000 tons for 2004 and did not change this estimation by the end of the year but Falconbridge of Canada anticipated a deficit of 5,000 tons for nickel supply in 2004. Norilsk Nickel of Russia forecasted that the supply and demand of nickel in 2004 would be balanced. Furthermore, Barcley Capital of London said that a deficit of nickel in 2004 would come to 14,000 tons, and Hague-based INSG ( International Nickel Study Group ) estimated as a shortage of nickel supply in 2004 seemed to be 10,000 tons. INSG forecasted as a deficit of nickel in 2003 was 40,000 tons and, in comparison with this forecast, a shortage of nickel in 2004 was reduced on the surface. Main factors to reduce a deficit of nickel in 2004 were an unexpected increase of nickel-based stainless steel scrap generated ( increased by 12%, corresponding to 75,000 tons of nickel content ) and a decline of ratio for production of nickel-based stainless steel ( 78% in 2003 and 77% in 2004 ). Also, an expectation, which China should increase their production of stainless steel in 2004, was excessive. Under the situation and mood on supply and demand of nickel as mentioned above, LME nickel prices for settlement in 2004 were US$8.060 per lb. ( US$17,770 per ton ) at the 6th January as the highest side and US$4.789 per lb. ( US$10,560 per ton ) at the 10th May as the lowest side, having fluctuated to a large extent. This large fluctuation of LME nickel price was an evidence that funds interfered considerably in LME nickel. For a reference, LME nickel price at the beginning ( the 2nd January ) of 2005 was US$7.470 per lb. ( US$16,690 per ton ) and that at the end ( the 31st December ) of 2004 was US$6.897 per lb. ( US$15,205 per ton ). A volatility of LME nickel prices in 2003 and 2004 was distinguished. A differential of LME nickel prices between the highest and the lowest was US$4.291 per lb. for 2003 and US$3.271 per lb. for 2004 respectively, and LME nickel prices had a large fluctuation during the last 2 years as per the table attached hereto. The soared nickel price had been sustained by a substantial expansion of stainless steel production, having shared a 65% of the demand for nickel. This tendency was continued from 2003 and a growth rate of stainless steel production in 2004 reached 7.9% per annum. An extent of the fever differed by month but was a powerful factor to support a fall of nickel price. As a matter of fact, LME nickel price fell in May of 2004 ( to a level of US$10,000 per ton ) but, after that, when LME nickel price weakened to a lower level than US$12,000 per ton, actual consumers came in the market to purchase nickel and, consequently, LME nickel price was sustained. Actual consumers put a strong criticism on the fact that nickel price rose by more than 2 times compared with its production cost ( US$6,000 - 7,000 per ton ). The active production of nickel-based stainless steel and a substantial recovery of the demand for nickel from super alloy sector arisen from the second half of 2004 caused to let actual consumers have an anxiety for late arrangement and late purchase, showing a cynical result. An opposition to higher nickel price by stainless steel mills came up to the surface on a positive wrestle with 200 series stainless steel ( lower nickel-based product containing 1 - 5% of Ni ), which was the matter already smoked from 2003. Also, the production of chrome-based stainless steel was aimed to increase. The production of 200 series stainless steel was the last resort strategy for operation adopted by stainless steel mills of China ( Taiyuan Iron & Steel ) and Japan ( Nippon Metal Industry ) by taking into consideration of an expansion of the demand for stainless steel in China. However, this production resulted in having toned down to a large extent in a main country of China from November - December of 2004, because Taiyuan Iron & Steel decided to put the brake on their production of 200 series stainless steel in order to avoid a confusion of products and a contamination of scrap as raw material. However, the grade to stop production is stainless steel, containing 1% of Ni, and the production of stainless steel, containing 5% of Ni, has been still continued for the active demand for this nickel grade of stainless steel. It was highly anticipated that an increase on production of 200 series stainless steel would decrease the nickel demand by 50,000 - 60,000 tons per annum. Also, owing to an increasing generation of nickel scrap stimulated by higher nickel price, it was supposed that a feeling of nickel shortage would be shrunk to a considerable extent. Originally, stainless steel mills of Europe have taken a cool attitude toward production of 200 series stainless steel. These mills did not move on this production by pointing out an influence on products and a contamination in collecting scrap anticipated to continue a confusion for a long period. In view of the matters which nickel price will be maintained hereafter on an unexpected high level and a tension on supply and demand of nickel is anticipated to continue for a long period, major enterprises have taken more positive activities to purchase nickel resources. The affairs thought to be the highlights in the second half of 2004 were the large-scaled offensive to take over Noranda of Canada ( parent company of Falconbridge ) and WMC Resources of Australia but these negotiations were unable to conclude during 2004 and carried over in 2005. Minnmetals of China started from summer of 2004 the negotiations with Noranda to take over its assets for US$5,000 million and obtained the exclusive right to negotiate further with Noranda from the 24th September of 2004. However, Noranda announced on the 17th November to end the exclusive negotiations by Minmetals. Noranda has placed Falconbridge under a wholly-owned subsidiary of Noranda from the 9th March of 2005, in order to make the self-defense, and the materialization to take over Noranda by Minmetals retreated further. Noranda has already acquired a 59% of the issued shares of Falconbridge and decided to purchase a remaining 41% of the shares. A ratio of shares to be purchased is applied to one share of Falconbridge against 1.77 shares of Noranda, effective until the 27th April of 2005. The negotiations with WMC Resources of Australia by Xstrata to take over its assets were not easy to go but BHP Billiton suddenly made on the 8th March of 2005 a knockout offer to the shareholders of WMC Resources ( to purchase by cash at A.$7.85 per share for all of the issued share capital of WMC Resources, amounting to US$7,300 million ) and an ambush - BHP Billiton has succeeded in this matter. Xstrata started from the 25th October of 2004 the negotiations with WMC Resources, offering initially to purchase the issued shares of WMC at A.$6.35 per share, and this offer price was risen to A.$7.00 per share in February of 2005 but an opposition to this price per share by WMC side turned to be unsuccessful in the negotiations. Both companies of Noranda and WMC Resources produce copper on a large scale in addition to nickel production and their copper resources have been highly evaluated. Falconbridge, a subsidiary of Noranda, has possessed Collahuasi copper mine of Chile and WMC Resources has also possessed Olympic Dam copper mine of Australia. These two copper projects are expected to be promising for the future. The background, which natural resources companies aim to develop nickel and copper resources and are actively working on large-scaled purchases of these resources, is due to the fact that it is not easy to materialize development of good nickel deposit. Glencore International AG of Switzerland, a major shareholder of Xstrata ( having acquired a 40% of the shares of Xstrata ), started from 1996 - 1997 to develop the Murrin Murrin nickel project of Western Australia ( to produce 35,000 tons per annum ) and aimed to produce nickel on a substantial scale from 2000 but has come to a standstill for this project at present. Glencore has currently taken a policy to produce nickel on an efficient scale and the large nickel project ( to produce 70,000 tons per annum ), located in Mount Margaret area of Western Australia and anticipated to be developed in the future, was decided in 2003 to be left in blank. It is supposed that, at present, this group has rather felt a large attractiveness of nickel deposit to produce 100,000 tons per annum possessed by WMC Resources. |
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| last modified : Fri 25 Mar, 2005 [10:37] |
