Cautious optimism for nickel

In the second part of a series of exclusive outlooks for the global metals markets in 2010, MINING DAILY and IBISWorld forecast trends for nickel prices.

In the second part of a series of exclusive outlooks for the global metals markets in 2010, MINING DAILY and IBISWorld forecast trends for nickel prices.

Trends in US dollar nickel prices, the value of the Australian dollar and in the volume of nickel production will continue to drive performance during the outlook period.

Nickel prices, which reached unprecedented highs in 2007, plummeted as economic growth slumped in 2008-2009.

Prices are expected to increase strongly in the second half of 2010 and into 2011.

However, producers are expected to exercise great caution in either committing to new projects or restarting existing ones, given the extreme volatility of nickel prices over 2006 to 2008.

Former OZ Minerals boss Andrew Michelmore, who now heads up the local offshoot of China’s Minmetals, has publically said, “The world is littered with roadside kill in laterite nickel.”

Thundelarra Exploration managing director Brett Lambert told MINING DAILY the price went high too rapidly.

Although sustainable at its current levels, Lambert said he would not be surprised if there were corrections to the nickel price over the course of next year.

“The price of nickel does look uncertain in the near term, but it will become more positive as the demand for steel pipes and other steel products rise,” he said.

Australia’s nickel output is expected to continue falling in 2009-10 to around 144,000 tonnes, as the full-year impact of idled and permanently closed mines takes effect.

Output is not expected to begin responding to higher prices in 2011-12, with more substantial gains expected over the following two years.

Higher prices are expected to make production at idled mines economically viable and will result in the development of new projects.

Overall, by 2013-14, Australia’s production is expected to be about 186,000 tonnes per year.

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