Bloomberg

First Nickel Supply Shortfall in Four Years Likely, CRU Says

March 3 (Bloomberg) -- Nickel production may fall behind demand this year for the first time in four years on increased usage by the stainless steel industry, the biggest user of the metal, according to London-based research group CRU.

The nickel deficit may be 20,000 metric tons this year after a surplus of 45,000 tons last year, Maartje Collignon, a CRU analyst, said in an interview. Nickel prices have climbed 20 percent this year, more than any of the other main metals on the London Metal Exchange, as stainless steel makers led by Madrid’s Acerinox SA reported increased orders and production.

“Nickel production is fairly quiet at the moment and we think that there will be a deficit this year, which will obviously boost prices,” Collignon said by phone yesterday. “In the third quarter we will see a little bit of a setback in prices as the projects that have been idled during the past year will get back into full production.”

CRU raised its forecast for nickel prices this year to an average $18,960 a ton from $17,416 estimated in December, Collignon said. The average for the contract for immediate delivery so far in 2010 is $18,867 a ton.

Last year, stainless steel production fell 4.5 percent as the worst global recession since World War II curbed demand, according to CRU estimates. Output this year may climb as much as 15 percent to 29 million tons from 25.2 million tons last year, Collignon said. Output in the fourth quarter was 6.8 million tons, she said. Stainless steel accounts for about two- thirds of nickel demand, according to CRU.

China, the world’s largest stainless steel maker, resumed production to full capacity in January and is expected to boost output by 19 percent this year, she said. Output will climb 13 percent in Western Europe and by 15 percent in the U.S., Collignon said.

--Editors: Claudia Carpenter, John Deane

To contact the reporter on this story: Anna Stablum in London at astablum@bloomberg.net