Inco Exec. Sees Nickel Recovery in 2002

Inco Ltd., the Western world's biggest nickel producer, said the nickel market, which has seen prices at lows since last year, was well positioned for a recovery this year.

Inco's executive vice-president for marketing, Peter Goudie, told an analysts' presentation in Toronto that uncertainty over the timing of an economic recovery was still, however, holding back the start of nickel inventory buildups that would fuel a price rise.

"We do see a recovery this year, the signs are there -- we are not yet seeing the strong growth in demand that will come with the recovery, so we need to have some caution until we see the indicators translate to stronger orders and stronger prices," Goudie said, adding, "I believe it is just a matter of timing."

Also supporting prospects of stronger nickel demand in 2002 was an expected lack of scrap availability, Goudie said.

He said the 2002 estimated scrap ratio should fall 2.6 percentage points to 45.6 percent, which was still above 1999 levels, and represents an additional 30,000 metric tons of primary nickel demand.

"Our forecast for nickel demand for 2002 is built upon a moderate recovery of 2.2 percent in stainless production, but lower scrap availability and a modest inventory build should result in nickel demand from the stainless industry growing strongly," he said.

Goudie forecast only modest growth in nickel demand from non-stainless applications of just over 1 percent, but said it added up to nickel demand growth for the western world and China of 6.4 percent in 2002.

He said nickel demand growth will be driven by the timing and speed of an economic recovery, while a nickel price increase will be determined by the expectation of that happening.

Goudie said he had seen a shakeup in the management of Russia's Norilsk Nickel, the world's biggest nickel producer.

"I see change, not in production levels but in management," he said, adding that Norilsk had become more market focused and a disciplined nickel producer.

He said Norilsk had started recognizing the nickel supply-demand situation in 2000, and given that nickel was a byproduct of its platinum group metals production, appeared to have stockpiled some nickel rather than sell it at the current low price.