Flood of nickel sparks price warning

More nickel coming onto the market from new or restarted mines is likely to depress the price of the metal used mainly in steelmaking, says Intierra:

“In the near term, according to Intierra Resource Intelligence, the nickel industry faces an era of relatively low prices, certainly in relation to the cost of new production. Against this background, the upsurge in production from new projects raises fears that available supply cannot be absorbed by the market.”

Canada’s First Nickel said last week it nearly doubled production at its Lockerby mine in Ontario in the first quarter compared to Q4 2011. Late last year Royal Nickel (TSX:RNX) said it plans to advance its Dumont nickel project, which would rank as the fourth-largest nickel mine in the world, bested only by prominent mining camps in Russia (Norilsk), Sudbury and China (Jinchuan). And last year Norilsk Nickel, world number one nickel and palladium producer and Russia’s biggest miner, restarted operations at its Maggie Hays mine near Lake Johnston in West Australia.

Intierra notes most of the growth in nickel in recent years ha s been taken by nickel pig iron, a low-grade ferronickel mainly sourced in China as a cheap alternative to pure nickel. That has left nickel suppliers with a flat market.

Base metals and coal miner Sherritt said at the end of April that declines in nickel and cobalt prices were responsible for halving the company’s earnings in the first quarter.

Nickel almost touched US$10/lb at the end of January and has since declined to today’s price of $7.88/lb. The metal showed a double-top pattern in April, hitting peaks of $8.35 and $8.28 before slumping. Five years ago nickel traded at $24/lb.