Primary Nickel Expects to Grow

Anglo-Australian resources giant BHP Billiton believes primary nickel inputs to the stainless steel sector will grow at a faster rate in the coming years thanks to constrained scrap supply.

At a briefing in Sydney, Australia, by executives from its Stainless Steel Materials division, BHP said upside in the nickel price was still partially constrained by price elasticity, but, because of the reduced availability of stainless steel scrap, not to the degree seen in past years.

"Depleting secondary supply from stainless steel scrap is...aggravating the growing nickel supply shortage," said Chris Pointon, the division's president.

The benchmark three-month nickel contract on the London Metal Exchange is up about 42 percent year-to-date thanks in large part to surging steel consumption in China. At 0941 GMT, it was quoted at $10,260 a metric ton, equivalent to about $4.65 a pound.

Looking ahead, BHP is predicting the growth rate of stainless steel scrap production will slow from about 7.5 per year to less than 3.5 percent, while growth in primary nickel production will rise from 4.6 percent a year to more than 4.8 percent.

Nonetheless, Pointon said BHP was maintaining its long-term nickel price forecast of between $3 to $3.50 a pound.

"It's a very long-term view... more than 10 years out," he said.

Earlier in the week, the Australian Bureau of Agricultural and Resource Economics said nickel prices will be capped by what it sees as the growing incentive for stainless steel producers to reduce their reliance on the metal.

"This can be achieved by increasing the proportion of nickel scrap used in stainless steel production and by switching to stainless steel grades that require less nickel," the forecasting agency said. Dow Jones Newswire