Bloomberg Jan 12---Nickel supply will outpace demand this year as new projects start and demand growth in China slows following the government’s tightening monetary policies, said Sumitomo Metal Mining Co., Japan’s top producer.
World supply will exceed demand by 24,000 metric tons this year from a deficit of 57,000 tons in 2010, Toru Higo, general manager of the Tokyo-based company’s nickel sales and raw material department, said yesterday in an interview. Last year demand outstripped supply for the first time since 2006, he said.
The price of nickel gained 34 percent last year, becoming the second-best performer on the London Metal Exchange, as demand from China for stainless steel in homes and buildings increased. About two-thirds of nickel production is used for corrosion resistance in stainless steel.
“Global output may expand as some new projects start, while China’s demand growth will slow following tightening monetary policies and property regulation,” Higo said.
China is shifting to a “prudent” monetary policy to rein in liquidity, combat accelerating inflation and limit the risk of asset bubbles, the government said in December.
The country ordered banks to set aside more reserves six times and boosted interest rates twice in 2010 after record gains in lending and property prices. The country’s consumer prices jumped 5.1 percent in November, the most in 28 months.
New Projects
New projects include Vale SA’s Goro mine in New Caledonia and Sherritt International Corp. of Canada’s Ambatovy nickel project in Madagascar, he said. Goro will produce 20,000 tons this year and Ambatovy will add 10,000 tons, he said. Sumitomo Metal Mining has an 11 percent stake in the Goro mine.
Nickel supply will outpace demand this year by 10,000 tons, Macquarie Bank Ltd. said in a December report. That compares with a supply shortage of 80,000 tons in 2010, the bank said.
World nickel output is expected to increase 12 percent to 1,585,000 tons in 2011, while consumption may rise 6.5 percent to 1,561,000 tons, Sumitomo’s Higo said. China’s output may grow to 325,000 tons in 2011, including nickel pig iron, from 315,000 tons in 2010, while the country’s demand will likely rise to 590,000 tons from 540,000 tons, he said.
China became the world’s top nickel producer in 2010, surpassing Russia, which produced 242,000 tons, according to Sumitomo Metal Mining data.
Global stainless steel production may rise to 32 million tons this year from 31 million tons in 2010, he said. China’s stainless steel output is expected to grow 6.2 percent this year to 12 million tons, he said.
Steel in China
“Stainless steel output growth in China will slow after jumping 25 percent last year,” he said.
Sumitomo plans to boost refined nickel production capacity at its Niihama refinery in Ehime prefecture, in western Japan, to 65,000 tons a year by 2013 from 41,000 tons, with the completion of its $1.3 billion Taganito nickel and cobalt project in the Philippines.
In Japan, the yen’s strength against the dollar and the end of the government’s car-subsidy program may cool domestic nickel consumption, Higo said.
Nickel for three-month delivery in London rose 0.8 percent to $24,900 a ton at 1:54 p.m. in Tokyo.
“Given the outlook for market fundamentals, current prices appear to be a bit too high,” Higo said. Higher nickel prices may drive stainless producers to find alternatives such as chrome or manganese, he said.
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