New report analyses nickel supply and demand worldwide
Consumption of nickel is dominated by the stainless steel sector, which accounts for around 70%
of demand for primary nickel. Since a small dip in 2001, world output of stainless steel has
increased at an average of 10% per year, driven by China where growth has averaged over 50% per year
over the same period. The new report from market analysts Roskill, notes that at these growth rates
China will overtake Japan as the largest primary nickel consuming country, possibly as early as
2006.
The Economics of Nickel (11th Edition, 2006) forecasts that the outlook for nickel demand is one
of higher than average growth than that for the other base metals. If the 5%py growth in stainless
steel production forecast by the International Stainless Steel Forum in 2005 proves to be correct,
then demand for nickel in stainless steel is likely to grow at between 3% and 5% over the same
period.
New nickel projects to affect the supply/demand balance There are a number of potential nickel
mining and refining projects in various stages of development, as well as some expansions at
existing facilities that will ensure continued growth in supply of primary nickel to 2010. If all
major projects were to go ahead, nickel supply could increase by as much as 500,000tpy. However,
most projects are not due to come on stream until 2007/8 at the earliest, and there are still
question marks over some of the larger projects, such as Gag Island and Weda Bay in Indonesia.
With a small surplus forecast for the nickel market in 2006, Roskill expects the average nickel
price to fall to around US$12,000/t in 2006 from almost US$15,000/t in 2005. After this point,
Roskill expects there to be a balance between nickel supply and demand, but with continuing growth
in both the world economy and steel markets, a steady increase in nickel prices in line with
economic growth is forecast. This is until 2009 and 2010, when the deficit in the nickel market
could become larger; as a result, Roskill is forecasting the nickel price to end 2010 at
approximately US$16,500/t.
The impact of Incos proposed takeover of Falconbridge The major recent development on the supply
side for nickel is Incos proposed takeover of Falconbridge. If the takeover receives shareholder
and regulatory approval, new Inco will be the worlds largest nickel producer and the sixth
largest mining company. Combined production of Inco and Falconbridge in 2005 is estimated at over
330,000t, accounting for 25% of world refined nickel output.
Demand in end-use markets Despite short-term downturns in the aerospace and electronics
industries, demand for nickel in high performance and special performance alloys is expected to
continue to recover steadily in the medium term. The superalloy sector is forecast to increase at
around 5%py on the back of more optimistic predictions for growth in civil air traffic.
Of the more minor end-uses, consumption of nickel in plating and other alloy steels is not
expected to grow at much more than 2%py. In contrast, the battery market continues to offer strong
growth, albeit from a smaller base, and offers significant upside potential in the longer term if,
as appears probable, large nickel-metal hybride batteries become the future battery of choice in
electric and/or hybrid electric vehicles.
World reserve base and production The world reserve base of nickel, compiled by the US Geological
Survey in 2005, is 140Mt, which is around 100 times annual production in 2004. Australia, with 19%,
Cuba (16%) and Canada (11%) have the largest resources, while Indonesia, New Caledonia and South
Africa each have around 9% of global nickel reserves.
World mine production totalled 1.32Mt in 2004, the highest output ever recorded. Russia with 22%,
Canada (14%), Australia (12%), Indonesia (10%) and New Caledonia (9%) were the principal producing
countries. In company terms, ten companies or States controlled 75% of world nickel mine production.
In 2005, Norilsk Nickel in Russia with 18%, Inco in Canada and Indonesia (13%) and WMC (now part of
BHP Billiton) in Australia (9%) were the main producing companies.
