Nickel prices surge on shortfall cues

Spot nickel moved up 17 per cent in the last month in the domestic non-ferrous metals market to Rs 1,150 a kg against Rs 990 a kg in the beginning of the month owing to huge shortfall projected by the World Bureau of Metal Statistics (WBMS) given the rising demand from the stainless steel industry.

Domestic price of nickel moves, generally, in tandem with the London Metal Exchange where the price of this silvery white metal jumped more than 17 per cent to close at $23,030 a tonne against $19,395 a tonne in the beginning of the month.

Nickel is largely consumed by the stainless steel industry where demand for industrial and household applications are mounting daily.

Industrial development is driving demand not only for aesthetic uses but also for long life of the output made out of stainless steel.

The demand for cost-effective and short duration utensils are picking up fast, thus boosting nickel demand. India is a net importer of nickel. Depleting stocks on the LME-registered warehouses, from 18,276 tonne on May 30 compared with 26,925 tonne in the beginning of the month, has been a major cause of worry for stainless steel producers.

The world nickel market recorded a deficit of 6,000 tonne in the first quarter of 2006, with reported stocks some 3,000 tonnes lower.

Mine production rose 4.5 per cent to 327,000 tonne, with a return to "more normal" Canadian output levels accounting for most of the change.

Refined production rose 1.5 per cent to 332,000 tonnes, with small increases in Russian output and the re-emergence of Philippines as a producer accounting for most of the increase. In March, world production was 109,600 tonne and demand totalled 109,000 tonne.

Heating nickel prices was partly attributed to Canadian nickel producer Inco Ltd's announcement to operate its plant at a reduced rate in Indonesia for the next two months owing to a fire at the plant.

The disruption is expected to add further momentum to the price of nickel which hit an all-time high recently, in anticipation of a strike at Inco's key Canadian operation.

Inco's Indonesia subsidiary said a furnace fire at its Sorowako operation may reduce nickel in matte output by 1 million pounds, or around 454 tonne, a week for the next seven or eight weeks.

Prior to the fire, the PT Inco subsidiary was targeting 167 million pounds this year, the operation to run at around two-thirds capacity till July.