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Nickel, copper outlook strong
Allan Seccombe
Posted: Mon, 04 Feb 2008
[miningmx.com] -- NICKEL prices will range between $20,000 and $25,000/tonne over the next three years, with the potential to spike to $40,000 on unexpected delays in bringing new mines into production and smelter capacity issues, said Jessica Cross, the CEO of Virtual Metals.
There will be an estimated supply deficit of 500,000 tonnes by 2012, but this will be cut by half if all planned production comes on stream without a hitch, Cross said at the Mining Indaba in Cape Town.
“We see prices supported at $25,000/tonne in coming years,” she said.
The 2006 deficit of 41,000 tonnes shifted to an estimated surplus of 100,000 tonnes in 2007 from production of 1.45 million tonnes. The steel industry baulked at the record high of $51,000/tonne in May 2007, cutting back on consumption, she said.
Prices have subsequently retreated to around $25,000.
Chinese consumption of nickel, which is primarily used to make stainless steel, is estimated to have increased by 20% during 2007 to 300,000 tonnes despite the extremely high and volatile prices, Cross said.
One third of Chinese stainless steel has a high nickel content of eight percent.
The LME copper price will trade between $4,500 and $6,500/tonne, bearing in mind that 90% of current
copper production is profitable from over $3,000/tonne, said Robin Baskin, from the metal marketing arm at Fortis Bank.
Copper prices shot up to record highs of $8,800/tonne in May 2006 on the back of a weak dollar, synchronised global growth, an underinvestment on the supply side and a wash of investment dollars leaving low interest savings accounts, she said at the Indaba.
Fortis estimates $170bn was invested directly in commodities during 2007.
“There’s little wonder we’ve seen such a meteoric rise in commodity prices,” Baskin said.
China was a more important market to watch than the United States because it accounts for 27% of global copper demand, 14% more than the US. This is important for the market given the sharp slow down in new housing starts in the US, she said.
“What happens in the US and other markets is less important for copper than in the past. Instead, it is the Chinese economy that matters and as long as it keeps booming it
will be supportive for copper demand,” she said.
Fortis sees the copper price bottoming out at a level twice as high as the cyclical lows.
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