The nickel market may be in balance next year as demand strengthens amid potential delays in adding supply, according to Andrew Mitchell, an analyst at researcher Wood Mackenzie Ltd.
Following are comments made by Mitchell by phone on Nov. 20. Nickel, used mostly to make stainless steel, is down 11 percent this year on the London Metal Exchange, on course for a second annual retreat.
“There is more risk on the upside than on the downside. We are looking at a higher average price for next year. There is potential for continued volatility.”
“We are looking for a pickup in demand in the first quarter, and maybe extending into the second quarter as you get restocking.”
“Next year we see what one would call a balanced market. I would call it a balanced market, in essence, and it’s really to do with production in general.
“In part we’ve had upsets to the projects. You’ve had the likes of Vale New Caledonia and Onca Puma going horribly wrong.
“This oversupply situation is something that we’ve been looking at probably for the last four or five years. And each year it gets pushed out and pushed out because we’ve had delays in the projects getting built. The difference now is that these projects are built, and therefore delays are much shorter if anything now.
“Delays are no longer there. All we’re looking at now is how they’ll actually perform in terms of their production. History says that they do not perform in general as well as anticipated, certainly by the owners of the projects.
“You’ve got Ambatovy ramping up right now, you’ve got Koniambo begin to ramp up fairly shortly. If those do not perform in a manner that the operators hope, obviously that will impact the amount of nickel supply, both for next year and the following year. But likewise, if actually Ambatovy and Koniambo perform really well, then we could have a much bigger surplus that could put downward pressure on prices.”
On high-pressure acid leaching technology:
“The history of the projects leads us to having this cautious approach to ramp-ups. If you look at HPAL, it’s a very complicated chemistry set. It’s a complicated piece of kit. And each ore body is slightly different as well. And it’s the same in ferronickel.”
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