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| General Review Of Nickel In 2005 And Its Outlook For New Year (1) |
| New Inco Starts And Posco Produces Nickel By Themselves |
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In the course of the matter, which the average cash price of LME nickel for the calender year of 2005 recorded US$6.69 per lb. ( US$14,748.91 per ton ) and nickel producers certainly benefitted from this highest market price, a plan of the merger between Inco and Falconbridge was announced on the 11th October of 2005. This plan of the merger between Inco and Falconbridge aims to raise a profitability, to survive as nickel producers and to protect their companies from the offensive to take over as assumed to be taken place by giant enterprises, and it has been understood by the market that this merger symbolizes the way to live as natural resources companies under the power game, which is whirling since 2004. New Inco produces 336,000 tons per annum of nickel at the stage of 2005 and will target to expand this production capacity to a scale of 453,600 tons per annum by 2009. Although the two giant nickel producers, ranked as the second and third largest companies of nickel in the world, are going to merge, it is certain that, as far as natural resources are concerned, larger giant enterprises than New Inco have still existed with several numbers and are sharpening their nails to take over nickel and copper producers, who are expected to grow further. Accordingly, even if New Inco starts officially in January - March quarter of 2006, these giant enterprises have been still strongly interested in nickel and copper businesses and there is a possibility to come up with the work to take over New Inco at anytime. However, the treatment, as adopted this time, has made the best use of a lesson, which Noranda of Canada ( the parent company of Falconbridge ) had suffered from the offensive taken by Minmetals of China, a state-owned company, to take over Noranda during from summer of 2004 to the beginning of 2005. Under the circumstances which nickel producers have become an oligopoly and new nickel projects have been restricted, the matter in question is how do stainless steel mills take the countermeasures for nickel units ( nickel metal and nickel-based stainless steel scrap ) as raw materials, having shared 47% of the cost for production of stainless steel. When, as an analyst ( Stainly Morgan ) has anticipated, LME nickel price moves on a level of US$6.50 per lb. in 2006 and on a level of US$7.00 per lb. in 2007, LME nickel price is maintained on a higher level than US$6.00 per lb. for the successive 4 years. If this aspect of nickel price is materialized, the primary mission to reduce prices of stainless steel products and to develop and enlarge the market for stainless steel as assigned to stainless steel mills will become a dream, because higher nickel prices push up prices of stainless steel products. Posco of South Korea announced their project that the company constructs a refining plant in South Korea ( to produce 30,000 tons per annum of nickel in ferro-nickel from 2008 ) as a joint venture with SMSP of New Caledonia in order to ensure nickel production by themselves. This matter will put a substantial impact on the countermeasures for raw materials adopted by stainless steel mills. It is supposed that Posco made a final determination of this project in October - December quarter of 2005. It is generally assumed that the cost to produce nickel ( including a profit for enterprise ) will come to US$4.53 per lb. ( US$10,00 per ton ), but the composition, which nickel producers put an excessive profit of more than US$2 per lb. in their purse for a long period, is going to form. In view of the facts that new nickel projects are slow to progress, Chinese mills have planned to increase their production of stainless steel to an extraordinary extent, and so on, a strong possibility to tighten the supply situation of nickel is supposed to come up. The prices of raw materials share 65% of the costs to produce stainless steel and only remaining 35% have to cover the charges for melting and rolling and other expenditure. Therefore, the industrial composition for production of stainless steel consists of a low degree of its process. The measure for nickel decided this time by Posco is suggesting a new way for stainless steel mill. It will be not allowed to accept the composition in the past years, which nickel price to be settled with stainless steel mills has been based on LME nickel price and, consequently, the uniformity of nickel price to be purchased by stainless steel mills in the world comes to be higher. The supply situation of nickel in 2005 was somewhat short in the first half but turned to be excessive in the second half. However, many of the parties concerned, such as Inco and Eramet, forecasted at the beginning of 2005 that the supply of nickel in 2005 will see a shortage of 13,000 - 14,000 tons. Also, INSG ( International Nickel Study Group ) assumed that the supply situation of nickel in 2005 will be balanced on a macro base with <> production of 1,310,000 tons ( compared with 1,250,000 tons in 2004 ) against <> consumption of 1,310,000 tons ( compared to 1,250,000 tons in 2004 ). On the other hand, stainless steel mills in many regions of the world decided to reduce their production from April - June quarter of 2005 because of excessive stocks of stainless steel products. Stainless steel mills in Europe, the USA, Japan, South Korea and Taiwan, excluding China, entered at once into cutback of the production and this countermeasure resulted in a decrease of more than 500,000 tons for the production in this quarter and an excess of nickel. Accordingly, LME nickel stocks increased from 6,822 tons as of the 1st July of 2005, as the lowest level in this year, to 36,042 tons as of the 30th December of 2005, showing actually an excess of nickel in the second half . China, where imported more than 2 million tons per annum of stainless steel products from the western market, increased their production of crude stainless steel in 2005 by 800,000 - 900,000 tons to a scale of 3.70 million tons per annum and is anticipated to produce 4.40 million tons per annum of crude stainless steel in 2006. This aggressive expansion of the production in China has become the wall for an expansion of stainless steel to be produced by mills in the western world. A fault of the above cutback has come up to the surface from the second half of 2005. When the market of nickel in 2005 is reviewed, it is not too much to say that the year of 2005 started with a power game based on the theory of capitalism. Noranda of Canada passed the offensive to take over taken by Minmetals of China and continued from autumn of 2004 with an unsuccessfulness and, in line with the countermeasures to protect the company, Noranda became a 100% owner of Falconbridge, a subsidiary of Noranda, from March of 2005 by means of having acquired 42% of the shares of Falconbridge, which resulted in starting New Falconbridge from July of 2005. Also, in order to take over WMC Resources of Australia, BHP Billiton offered on the 8th March of 2005 a knockout bid to the market ( to purchase at A.$7.85 per share ) and succeeded in this takeover. BHP Billiton acquired 55.45% of the shares of WMC Resources as of the 3rd June of 2005 and this matter was settled. Xstrata, which intended to take over WMC Resources from autumn of 2004, failed in this takeover. By having taken over WMC Resources on the 3rd June of 2005, BHP Billiton has expended their capacity to produce 180,000 tons per annum of nickel and become the third largest producer of nickel in the world, following Norilsk Nickel of Russia ( to produce 240,000 tons / year ) and Inco of Canada ( to produce 220,000 tons / year ). For a reference, Xstrata has acquired on the 15th August a 19.5% of the shares of Falconbridge for US$1,700 million from Brascan as a major shareholder of Falconbridge, corresponding to nearly whole ( 20% )of the shares held by Brascan, and exhibited their strong interest of nickel and copper resources. LME nickel price in 2005 fluctuated from US$8.010 per lb. at the 13th May as the highest one to US$5.216 per lb. at the 1st November as the lowest one and a differential between these two prices came to US$2.794 per lb.. In comparison with the fluctuation of LME nickel price seen in 2004, the highest LME nickel price in 2005 corresponded to a similar level to that in 2004 but the lowest one in 2005 was US$0.427 per lb. higher than US$4.789 per lb. as that in 2004. LME prices of copper and aluminum were calm in 2004 but recovered remarkably from autumn of 2005 and had a boom . Being pushed by this heat wave, nickel price was put the brake to fall and a relative rise of LME nickel price was developed in December of 2005. The movements of LME nickel prices on the highest and lowest sides in the last 10 years were as per the table shown right ( the prices were based on US$ per lb. for cash ). |
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| last modified : Fri 27 Jan, 2006 [11:36] |
