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
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.