The Hindu Business Line : Nickel may rule firm on good demand

NICKEL prices in the country are likely to rule firmer at least till the year end due to good domestic demand from stainless steel industry with continued limited supply.

Rising prices at the London Metal Exchange (LME) will continue to influence the domestic market.

``Nickel prices have risen sharply in the last five months, by breaching the psychological level of $10,000 a tonne. I expect price to go up further mainly on good demand and export prospects of stainless steel products,'' a leading importer said.

At the London Metal Exchange, cash prices of primary nickel crossed the $10,000-mark in mid-September. Cash prices jumped up by nearly 26 per cent to $10,265 a tonne on Friday from $8,095 a tonne in last May. Similarly, nickel three months futures, too, rose by 27 per cent to $10,325 a tonne from $8,105 a tonne.

In Mumbai metals market, nickel cathode price has risen nearly 20 per cent at Rs 595 per kg compared with Rs 500 per kg registered last May.

``Stainless steel production (mainly re-rolling coils and pata) in the country is around 8 tonnes for the financial year 2002-03, up by 8 per cent over previous year. As far as demand is concerned, growth rate is also almost same around 7-8 per cent per annum,'' Mr K.D. Chinivala, President, All India Stainless Steel Industries Association (AISSIA), said.

``Raw material supply position in 2002-03 remained satisfactory. Stainless steel industry, which had been suffering globally for a couple of years now, showed a sudden recovery in end-2002,'' Mr Chinivala said. The share of nickel consumption in the stainless steel sector is 65 per cent.

``A steady appreciation of the rupee against the US dollar has impacted the export, cutting the profit margins but our industry has been steadily growing on the export front. As a precaution, a number of exporters are shifting to billing in the Euro,'' he added.

Rising global stainless steel output is seen as a key driver of nickel demand. Several new steel production facilities are expected to come up in Asia and North America, according to the Australian Bureau of Agricultural and Resource Economics (ABARE) report.

Historically low stocks along with strong demand growth and limited supply availability will help push nickel to an average of $11,000 per tonne, or about $5 per pound, in 2004, agency forecast.

However, prices will be capped by the growing incentive for stainless steel producers to reduce their reliance on nickel. This can be achieved by increasing the proportion of nickel scrap used in stainless steel production and by switching to stainless steel grades that require less nickel, the agency said.

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