COLUMN-New nickel projects ramping up...slowly: Andy Home

Thu Nov 7, 2013 8:01am EST
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By Andy Home

LONDON Oct 7 (Reuters) - You don't need to look very far to understand why nickel has been the consistent underperformer of the London Metal Exchange (LME) base metals pack since the middle of the year.

The explanation comes on a daily basis in the form of the LME's morning stocks report.

Today's showed registered inventory rising by a net 558 tonnes to 240,408 tonnes, an all-time record high - the latest in a long series of them - as surplus units spill into exchange warehouses.

Nickel is a market in chronic oversupply resulting from systemic over-production.

Supply needs to be cut if the market is to rebalance. But this market's supply profile is complex, with at least three moving parts.

The first is China's nickel pig iron (NPI) sector. There are still few signs that the expansion momentum in NPI is slowing. Rather, price pressures are forcing producers to switch to lower-cost technology, in effect reducing the collective cost curve.

That's put pressure on existing higher-cost producers in the rest of the world.   Continued...