Nickel producers look to G20
Battered nickel producers need the big stimulus projects mooted by the G20 leaders to become reality in order to ignite a recovery, the Nickel Institute head told Reuters on Wednesday.
“If the commitment is made to these infrastructure projects, it’s important to actually make sure they deliver,” Stephen Barnett said as world leaders gathered in London.
Collapsing demand from steel mills has hit nickel hard. Output of stainless steel accounts for nearly 70 percent of global nickel demand.
Nickel 3-month contracts in London were trading around $10,100 a tonne on Wednesday, down about 80 percent from the all-time high of $51,800 hit in May 2007.
Developed and emerging market countries have announced a variety of stimuli packages totalling trillions of dollars during the last 12 months.
But such measures have often brought greater calls for steel industry protectionism — in the United States especially.
This worries Barnett, whose organisation has 21 members and represents about 85 percent of global primary nickel production.
“Nickel is as global if not more global than most industries,” he said. “It’s important that that understanding is there in terms of when they are making the (stimulus) introductions.”
It is also important that government infrastructure projects are looked at from a life-cycle basis rather than merely a cost-basis, Barnett added.
“The Chrysler tower and the Gherkin building will still be around in 300 years unless they find another use for the space,” Barnett said. “That’s one of the key things that needs to be looked at … the use of nickel results in durable, long-lasting infrastructure rather than something needing replaced in 20 years.”
“The issue potentially, is that there are lots of big-ticket infrastructure projects announced, then they scrabble to do something quickly and they’re not completed properly with the right materials.”
CUTBACKS
Figures from the International Stainless Steel Forum (ISSF) show that preliminary global stainless steel production for the fourth quarter of 2008, slumped by 30 percent year-on-year to 4.84 million tonnes.
The knock-on effect is that demand for nickel has fallen by about 20 percent since the end of last year and producers have cut production by between 20 to 30 percent, Barnett said.
In a sign of the times, Ufaleynickel, Russia’s third-largest nickel producer, said last month that it had shut down a furnace and could halt output altogether if lack of demand caused by the financial crisis continued.
“Clearly in the current climate, there is a huge issue with demand,” said Barnett said. “Despite the downturn, it is still the case that the stainless steel industry is the only metal that is growing at the same rate as the plastics industry.”
And although unable to give an idea as to when the Institute’s members see any economic upturn and subsequent rise in nickel prices, Barnett saw China as crucial. “Industrial production … the driver of nickel demand of the last few years has been China and Asia,” Barnett said. “When those resume growth, you’ll see huge demand in nickel.”
Greener environmental policies from governments will also eventually boost nickel demand, Barnett added, with wind turbines, nuclear power plants and hybrid vehicles all using the metal.
“Because of what it’s used for and if you look at the stimulus packages, I would not be surprised if we saw a (nickel) turn-up early in the (metals) cycle rather than late.”
As reported in the Guardian
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