As nickel continues the "longest bull market ever," TD Newcrest metals analyst Greg Barnes Sunday predicted that nickel is heading for a surplus between 2009 and 2012, which may force some future nickel projects to be placed on the back burner.
In a presentation to the Prospectors and Developers Association conference, Barnes noted that nickel production should start to accelerate this year as new mines begin production. The bad news, however, is that as the next generation of nickel mines come on line, adding an additional 10% to current nickel capacity, it will throw the market into surplus, he advised.
While nickel production could generate a surplus between 2009 and 2012, Barnes forecast that the nickel supply/demand will slip back into significant deficit by 2013.
The Chinese nickel pig iron producers, who produce a lower-grade variation of nickel, have proven their staying power, employing product enhancement and improvement to remain competitive, according to Barnes.
As average nickel prices trade in the range of $10-$15/lb, Barnes anticipates stainless steel restocking in Europe and Asia during the second half of this year. Chinese stainless steel demand is expected to improve during the second quarter. Barnes anticipates that China's stainless steel production will exceed that of all western world producers in 2009.
Nonetheless, Barnes termed stainless steel production "notoriously fickle and volatile."
