NICKEL - Major market developments in April

Wed 14 May 2008

Rising supply, high stocks and lower than expected consumption from the key stainless steel industry point to weaker nickel prices in the coming months, analysts say.

"The next major move for prices will probably be on the downside. Production will inevitably swamp demand," said independent consultant Angus MacMillan.

The London Metal Exchange (LME) three-months nickel price was last indicated at $26,400/600 a tonne.

Demand from stainless steel producers has fallen short of expectations so far in the seasonally stronger second quarter and fears are growing for impending weakness in the Asian market.

"...The market is likely to remain over-supplied for the time being unless there is an acceleration in growth in the stainless sector," Standard Chartered said in its latest report.

"The recent softness in Asia suggests that the worst is not yet over," it added.

Standard Chartered predicts three-month nickel prices will average $27,900 a tonne in the second quarter of the year, falling to $24,000 in the third quarter and to $22,000 in the final quarter.

Another analyst said the market would be more or less balanced for the year as a whole. While he did not expect prices to go higher, he thought they would hold up reasonably well.

Beyond that he said much would depend on how new projects starting up towards the end of the year fared and their impact on nickel production.

Source Reuters UK

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