Troubling Cuban efforts to re-emerge from its 2009-10 cash crunch, the
recovery of nickel prices since a dive in 2008 has stalled again in
March, and prices may continue to stagnate or slide this year, according
to Nickel Investing News.
Nickel prices on the London Metals Exchange have slid to $24,405 per ton
as of May 17, after setting a post-crash record of $29,000 in March.
"Several factors at play in this downturn may not be alleviated anytime
soon," Nickel Investing News writes, which had been bullish most of last
year regarding a price rally. "Due to the increasing use of substitutes
for nickel in steel production, as well as new, large-scale nickel
production, a surplus may develop in 2011."
Some 60 percent of the world nickel production goes into the making of
stainless steel. Demand in China for stainless steel has weakened
slightly from the double-digit growth over the last few years, while the
use of a nickel substitute — nickel pig iron — has grown.
"As a result, China will continue to reduce imports of refined nickel
over the next few years," according to Nickel Investment News. China is
the single biggest buyer of Cuban nickel.
Also, nickel producers around the world have expanded production in
response to the price rally. While demand for nickel is expected to rise
7.7 percent this year, supply is expected to rise 10.1 percent in 2011.
"While stainless steel demand has grown, nickel is likely to be in
surplus in 2011 and beyond," Nickel Investment News concludes.
Brazilian mining giant Vale SA is building a 220,000 tons a year
ferronickel plant, the largest plant in the world. Venezuela and Cuba
are currently building a $500 million joint venture ferronickel plant at
Las Camariocas in eastern Cuba.
On the upside, demand in Japan, due to post-earthquake reconstruction
and recovery of its auto industry, might reduce the oversupply of nickel.