Nickel Glut Recedes as Biggest Metals Loser Rallies: Commodities – by By Agnieszka Troszkiewicz ( – November 26, 2012)

Nickel, this year’s worst-performing metal, is rallying as analysts from Standard Bank Plc to BNP Paribas SA forecast a smaller-than-expected supply glut in 2013.

Standard Bank reduced its estimate for the surplus by 17 percent on Oct. 15, citing project delays, and BNP Paribas said Nov. 12 it now expects output to match demand, after cutting its projection three times since April. Credit Suisse Group AG and Citigroup Inc. also lowered forecasts in the past two months. Nickel will average $19,000 a metric ton in the second quarter, 15 percent more than now, the median of 11 analyst estimates compiled by Bloomberg shows.

Futures fell 68 percent since reaching a record $51,800 in 2007 as higher prices spurred companies from Anglo American Plc to Vale SA to invest in new mines or expand existing ones. The surplus started in 2011 as slower growth weakened demand for stainless steel, which accounts for 65 percent of nickel consumption, and new supply emerged. Analysts are now paring supply forecasts as projects fall behind schedule. Prices rallied 4.4 percent in the past month.

“The market balance is tighter than people had initially thought,” said Leon Westgate, an analyst at Standard Bank in London. “There are a number of operations and significant amount of capacity that may run into various issues. In terms of that producer wall of nickel, it may not be quite as large or impregnable as it looks on paper.”

Metal Production

Nickel retreated 12 percent to $16,455 on the London Metal Exchange this year as the bourse’s LMEX gauge of six industrial metals gained 1.3 percent. The Standard & Poor’s GSCI index of 24 commodities rose 0.3 percent and the MSCI All-Country World Index (MXWD) of equities advanced 9.8 percent since the beginning of January. Treasuries returned 2.3 percent, a Bank of America Corp. measure shows.

Refined-metal production will expand 4.9 percent to 1.75 million tons next year, as demand increases 6 percent to 1.72 million tons, Standard Bank estimates. Its projected surplus of 35,000 tons is 27 percent lower than this year and the forecast 5.8 percent advance in mine output in 2013 would be the smallest gain since 2009. Credit Suisse expects a glut of 31,000 tons and Citigroup a 22,300-ton supply shortfall.

More than 800,000 tons of planned or existing production capacity is under threat of disruption in the next 12 to 18 months, according to Standard Bank. Macquarie Group Ltd. anticipates that as much as 93,500 tons of production may be disrupted next year, compared with 9,000 tons in 2012.

Two Quarters

Stainless-steel output will expand 3 percent to a record 35 million tons in 2013, according to Sheffield, England-based MEPS (International) Ltd., an industry consultant founded three decades ago.

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