Nickel on a rollercoaster – by Carol Mulligan (Sudbury Star – January 3, 2012)

The Sudbury Star is the City of Greater Sudbury’s daily newspaper.

The European economic malaise and competition from upstart nickel pig iron producers will likely combine to keep the price of nickel fluctuating in 2012, says a metals analyst.

Price volatility is bound to continue next year, says Montreal-based Terry Ortslan of TSO & Associates. From a high of $16.91 a pound in 2007 on the London Metals Exchange to a low of $6.65 a pound in 2009, nickel averaged about $12.25 a pound in 2011, said Ortslan.

“Recently, the prices are struggling at $8 a pound,” Orstlan said last week, after returning from a business trip to China, where nickel continues to be in high demand.

Ortslan says $7 a pound would be a “low target” for 2012, although he would not rule out that possibility because of Europe’s economic woes and China’s ongoing production from non-traditional sources.

China’s nickel pig iron producers are competing with traditional producers, turning out 60,000 to 70,000 tons a quarter, up from 10,000 to 20,000 tons a quarter in 2007-08.

Ortslan said that essentially represents “a Vale or a Norilsk.”

Lower nickel prices caused junior miner URSA Major Minerals to cut operations at its Shakespeare Mine west of Sudbury.

Richard Sutcliffe, the company’s president and chief executive officer, said last month that URSA will defer development of the East Pit at Shakespeare “in anticipation of stronger metal prices in the first half of next year.”

Whether those higher prices will come next year is anyone’s guess.

“Certainly, $10 a pound would be ideal for the ongoing producers and new projects coming on stream,” said Orstlan, “but economic caution flags are everywhere.”
Erin Weir is an economist with United Steelworkers, based in Toronto.

Nickel prices are tough to predict, but in general are “quite high by historic standards, and it seems likely that they’re going to remain fairly high” next year.

Despite economic uncertainty in Europe and North America, “Asian economies seem to be among the strongest,” said Weir.

Europe is not the main consumer of nickel, “so for nickel prices to really go down, there’d have to be such a calamity in Europe that it was bringing down the whole world economy.

“I’m not saying that’s impossible, but that’s what would have to happen.”

The most likely scenario is that nickel prices will remain fairly high, again by historic standards.

Weir and other metals watchers are keeping a watchful eye on copper, which is widely used in so many industrial processes that demand is likely to remain strong.

There’s an adage among economics that “copper has a PhD in economics” — it is that strong a bellwether for economic trends, said Weir.

Business networks such as BNN and CNBC rarely broadcast the price of nickel, said Weir, but “they’ll always have the price of copper up on the screen.”

According to Vale spokeswoman Angie Robson, the Brazil-based company produces as much copper throughout Canada as it does nickel — $400 million pounds of each metal.

Xstrata Nickel is also a large copper producer.

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