Lemmon feels that nickel will be the only LME metal to rise this year, with cash prices averaging about $3 a pound, some 10 percent greater than last year.
Demand growth is seen underpinning the metal's price. Macquarie is projecting world nickel consumption will grow by 6.5 percent this year to 1.18 million metric tons.
On the supply side, Russia's Norilsk, the largest nickel producer, started selling less and stockpiling more in 2000 and 2001, as the market deteriorated.
Lennon expects demand growth and continued supply discipline from Russia will keep prices up.
"We believe that without the Norilsk material, the market would be facing severe shortages over the 2004/05 period, he said."
Lennon adds that the key to strong nickel prices is stainless steel demand, which accounted for about 66 percent of total Western world nickel demand in 2001 and that this year it is "the only area of growth".
There are two key reasons for this. One is a shortage of stainless steel scrap, which is putting upwards pressure on nickel prices. But the biggest driver is China, whose stainless steel demand grew by 26 percent last year and is projected to grow by 25 percent this year to 3.05 million metric tons.
"In 2002, China will account for around 18 percent of world stainless steel demand, compared with just over 11 percent in 1998," said Lennon. "This year, we estimate that the growth in Chinese demand alone will account for 73 percent of total growth." Financial TimesLatest from Recycling Today
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