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Msg  38344 of 65647  at  1/16/2008 7:20:22 PM  by


Scotia conference - Ni

Nickel - Sean Mulshaw, Brook Hunt & Associates

Mr. Mulshaw highlighted that Chinese stainless steel production has grown 45%-50%

per year since 2001, driving global demand for nickel. In an attempt to curb nickel

consumption in recent years, China has cut back on production of austenitic stainless steel,

and has begun to produce more low nickel grade steel instead.

A notable development in the Chinese stainless steel industry over the last few years

has been the growth in consumption of nickel-pig iron, which Brook Hunt forecasts could

supply 35% of all primary nickel needs in China by 2009, growing from a non-existent

supply as recently as 2005. As the quality of nickel pig iron has improved along side

technological advances, the number of uses for the relatively new product has increased.

Brook Hunt estimates that nickel-pig iron is now being used to produce stainless steel with

nickel grades as high as 8.5%, allowing it to be used in both 200 and 300 series stainless

steel. Brook Hunt estimates that supply of nickel pig iron in China may total 102 kt in 2008

and 115 kt in 2009, up from the 71 kt estimated in 2007.

Cash cost to produce nickel pig iron are estimated to be about $10.50/lb. At such a high

price, this places production of NPI near the top end of the nickel industry cost curve

(Exhibit 4).

Mr. Mulshaw also outlined a decrease in the nickel

content in Western stainless steel production, again due to

lower production of austenitic stainless steel and higher

production of low nickel grade steel instead.

Despite the attempts to lower nickel consumption, Brook

Hunt estimates that the nickel market will be in a deficit

of 20 kt in 2008. With regards to prices, Brook Hunt

estimates nickel prices will rise in Q2/08 to over $21/lb,

fall in Q3 and average almost $17/lb for the year. For

2009, a surplus of 22 kt is predicted with an average

annual price of $15/lb.

Scotia Comment - In contrast to Brook Hunt's forecast,

we are forecasting the nickel market to show a surplus of

roughly 12 kt in 2008 as we are expecting slightly higher

production growth and lower consumption growth than

estimated by Brook Hunt. As a result, we are expecting

nickel prices to average $12.75/lb in 2008. For 2009, our

forecast for a surplus of 25 kt is in agreement with Brook

Hunt's estimate of a 29 kt surplus.

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Msg # Subject Author Recs Date Posted
38377 Re: Scotia conference - Ni... Cash Cost $10.58 Ni Pig Iron MontyHigh 0 1/17/2008 10:14:34 AM

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