As supply and demand fundamentals have rapidly diverged, nickel has slumped more than 80 per cent from its record $51,800 a tonne price reached in May 2007. Miners have been attempting to bring the split fundamentals into line with production cuts. So far cuts equal to about 20 per cent of world supply have been undertaken with more cutbacks on the way. Producers of the metal will cut output by an estimated 36 per cent this quarter, and 26 per cent in the following quarter.

Nickel demand for 2009 is forecasted to see a second annual decline. Global demand will reach 1.15 million tonnes this year; consumption was 1.27 million tonnes last year. Stainless-steel accounts for about two-thirds of nickel demand. Demand from the top market, the Chinese steel industry, has dropped by as much as 70 per cent due to the economic slowdown. Ferro-nickel is a main ingredient in steel production.

Company News

Norilsk Nickel, the world’s largest miner of the metal, said prices are high enough for it to maintain current spending. Prices at $9,500 to $10,000 a metric tonne will allow Norilsk “to breathe freely,” Deputy Chief Executive Officer Oleg Pivovarchuk said in an interview in Moscow. Last month Norilsk halted operations at it remaining units in Australia, claiming that they were “unsustainable”. Output is still being sold at a premium in the range of $30 to $230 a tonne to the benchmark London Metal Exchange price, Pivovarchuk said. Norilsk rejected a preliminary offer from a Chinese firm for as much as 60,000 tonnes of nickel at a 5 per cent discount to the LME price, he said, forecasting sales to China of 45,000 tonnes this year. Norilsk has already signed sales contracts for 75 per cent of its nickel production this year, and all of its planned copper output, he said.

In other news, Russian authorities have asked Norilsk to supply details about its financial situation and dealings in its shares. Deputy Prime Minister Igor Sechin had sent a letter to the company requesting details of transactions closed at the beginning of this year. Sechin asked for details of a buyback program through which Norilsk purchased 4 per cent of its stock from shareholders, a deal that, at the time, was opposed by rival shareholder United Company RUSAL.

The Environment department has approved the mining permit of Oslo-based miner Intex Resources ASA for a nickel project in southern Luzon. Intex wants to raise funds for the 9,720-hectare nickel mine by next year, after the completion of a definitive feasibility study. “When we have all the permits and the feasibility studies, we will go to the capital markets,” Intex President and Chief Executive Officer Erlend Grimstad told reporters. Mr. Grimstad said Intex expects to start commercial operations late in 2012 or early in 2013. Intex had deferred its definitive feasibility study to the last quarter of the year from the previous target of completing it within the first quarter given the economic slowdown. The company initially expected to invest $2 billion for the first stage of developing the mine, which is estimated to produce 40,000 metric tonnes of nickel and 3,000 metric tonnes of cobalt per year.

Platinum Group Metals Corp. is looking at venturing into manganese and chromate, to compensate for dropping nickel demand and prices. “We are seriously considering multi-alloy production like ferro-manganese or ferro-chrome just to be able to utilize our plant and equipment,” Platinum Group Senior Vice-President John H. Cabarrus told officials of the Mines and Geosciences Bureau. ”We are conducting a lot of research and development” Mr. Cabarrus added. Platinum Group has shelved its nickel processing plants in Iligan City in Lanao del Norte and in the town of Manticao in Misamis Oriental. The company invested $20.59 million and $9.948 million to develop the Manticao and Iligan processing plants, respectively.

Brazil’s Vale continues to look for cost savings at its key projects and expects two nickel mines under construction will produce metal in the next few months, a company spokesman said on Monday. The company hopes to lower the cost of the Goro nickel project in the French Region of the South Pacific island of New Caledonia, which is due to start production in the second quarter, and the Onca Puma project in Brazil, due to begin output in the third quarter. “As previously announced, investment costs are under review because we are currently renegotiating with suppliers. These negotiations have not been concluded yet,” said Cory McPhee, a spokesman for Vale Inco. Vale acquired nickel miner Inco in 2006. Goro was previously budgeted at $3.2 billion, while Onca Puma had been expected to cost $2.3 billion. Vale has also said that the expected start dates could change depending on market conditions. Goro is anticipated to produce 60,000 tonnes of nickel a year when it reaches full capacity. Onca Puma, whose second line is expected to begin output in January, is seen producing 52,000 tonnes a year.