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| World Capacity For Nickel Production At End 2009 Increases By 270,000 Tons / Year |
| = Large Nickel Projects Complete Successively, To Put Pressure On Supply Situation |
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It was known that the world capacity to produce nickel as of the end of 2009 will increase by 271,000 tons on an annualized base. INSG (The International Nickel Study Group) released in an early part of October their estimation of nickel to be produced in the world for 2009, which will come to 1,550,000 tons by an increase of 110,000 tons from the output in 2008, and this substantial increase of nickel production is due the fact that many large nickel projects are scheduled to complete successively from the beginning of 2009. From an apparent point of view, this expansion of the world capacity for nickel production will be able to accord with a growth of nickel demand in the next 3 years. New nickel projects expected to complete in 2009 are as per the table attached hereto. It was already pointed out from summer of 2008 that these new nickel projects will cause to grow an oversupply of nickel, and this situation is thought to connect with a fall of LME nickel prices at present. Incidentally, LME nickel price for three-month futures at the 17th of October fell to US$4.79 per lb., which came to a lower level than US$5.00 and recorded the historical lowest price since September of 2003. When this lowered price of LME nickel would continue for a long period, some of these nickel projects might become unprofitable and developments of these nickel projects are supposed to be influenced to a considerable extent. However, Vale-Inco, which is confident of a low cost for nickel production, announced in last week their activities to invest in facilities and said that the Company is scheduled to produce 450,000 tons per annum of nickel in 2015 by an increase of 81% from that in 2007. Accordingly, a skin-match surrounding nickel is anticipated to arise. The nickel supply on monthly base has already turned to be an oversupply from March of 2007 but a huge wave on international shortages of natural resources has stimulated speculators and, consequently, nickel has become a gear for money game with regardless of actual demand for nickel. For a reference, according to an estimation of nickel supply in the world traced by INSG, the quantities of nickel oversupplied are thought to be <> 2007 : 120,000 tons, <> 2008 : 30,000 tons and <> 2009 : 110,000 tons. In the course of time, these new nickel projects have enlarged and are scheduled to reach a peak in 2009 but, after that, new nickel projects will still follow heel after heel. It is not clear yet on which level is nickel price able to be stabilized but, when these new nickel projects are operated in 2009 as planned, a depression of nickel market is anticipated to continue a long period. However, there is no guarantee that all of new projects as mentioned in the attached table commence nickel production as programed. Vale-Inco already announced in last week that, as regards new nickel projects which include the Goro project and the Onca Puma project and are being proceeded, the Company has held the options to adjust rump-up timing or to postpone its completion depending on movements of nickel market. In view of the facts that these new nickel projects have no nature to be national one as seen particularly in the rising countries and are being developed by private enterprises, there is an opinion in the market that these new nickel projects have a flexibility to review its profitability whenever the projects are going to become unprofitable. However, the cost to develop nickel project had raised steeply in the last 2 - 3 years and, as seen from the Goro nickel project which was reevaluated by several times a scale of budget and a time of completion, it was necessary to increase the amount to invest in nickel project. For a reference, it was known recently that the nickel project in Surigao Norte State of Mindanao Island of Philippines (to produce 30,000 tons/ year) has increased its budget for development by 70% to US$1,700 million compared with that (US$1,000 million) as estimated in one year ago. Among the new nickel projects expected to complete in 2009, the projects to develop only nickel ore are six cases and the total quantity of nickel ore to be supplied by these six projects will come to 98,000 tons per annum. Some of these projects play the role of substituting alternative sources for nickel ore and, therefore, a possibility to loosen somewhat a pressure on nickel supply may come up. Also, China produced a considerably large quantity of nickel-contained pig iron from low grade nickel ore imported into China in the last 2 years but this production is anticipated to decrease to be nearly nothing in 2009 as the cost to produce this nickel-contained pig iron in China has become unprofitable and, accordingly, nickel-contained pig iron produced in China has a big possibility to retreat from power for nickel supply. This case is not negligible. It is supposed that nickel-contained pig iron produced in China would put an impact of 70,000 - 80,000 tons of nickel content in 2007 and 60,000 - 70,000 tons of nickel content in 2008 respectively on the nickel market of China. However, a boom of nickel-contained pig iron has left dead stocks of low grade nickel ore, which have been estimated to be approximately 10 million tons and stored at wharves of discharging ports in China, and an aftereffect of this heated production is not a problem to be resolved only in 2009 but also is thought to leave a dark shadow in the nickel industry together with facilities to produce nickel-contained pig iron. The myth, concerning a growth of stainless steel production in the world, is going to be peeled off the veil and, particularly, there is a strong opinion in the market that a depression of the production is being continued from the second half of 2008 and a recovery of this aspect is expected to come up in the second half of 2009. In view of the facts that nickel demand from stainless steel sector is unable to expect an increase and approximately 300,000 tons per annum of nickel scheduled to be newly supplied from 2009 are thought to put a pressure on the market, the matter in question is at which level is nickel price stabilized in 2009. According to the judgments of prices for base metals made recently by analysts, 20% of them estimate to bottom out the lowest ones by the end of 2009 and remaining 20% of them anticipate to have its bottom-out within this year. However, more than 60% of these analysts insist on a necessity to reduce the quantities of base metals to be produced in 2009. |
| last modified : Fri 24 Oct, 2008 [11:12] |
