Nickel Surplus May Climb to 5-Year High on New Mine Projects

A global nickel surplus may expand for a third year to the highest level since 2008 as supply from new mining projects outweighs China’s demand growth, Japan’s top producer said.

Supply will likely exceed demand by 60,000 metric tons in 2013, said Toru Higo, Sumitomo Metal Mining Co.’s general manager of nickel sales and raw materials. Supply outstripped demand by 40,000 tons this year and 22,000 tons in 2011, he said.

Sherritt International Corp. said Sept. 13 that its Ambatovy project in Madagascar got a six-month approval to operate commercially. Xstrata Plc’s Koniambo project in New Caledonia is scheduled to start production during the first quarter of next year, spokesman Wayne Groeneveld said Sept. 26. China, the biggest consumer, has been ramping up infrastructure spending to counter a slowdown in economic growth that’s on course for the weakest annual pace in more than two decades.

“The surplus will likely increase further next year with the Ambatovy and Koniambo projects starting production,” Higo said in an interview yesterday. “On the demand side, all countries except China are slowing.”

Prices of the metal, used for corrosion resistance in stainless steel, have fallen 0.4 percent this year, making it the worst performer among six base metals on the London Metal Exchange. Three-month delivery metal traded at $18,636 a ton on the LME at 2:40 p.m. in Tokyo. LME stockpiles on Oct. 1 reached the highest level since March 30, 2011.

China Infrastructure

World stainless-steel output may gain 4.7 percent to 35.7 million tons in 2013, Higo said. Output by China, the biggest producer, is expected to rise 9.7 percent to 15.8 million tons with the new infrastructure projects, he said.

In September, China’s government approved plans for 2,018 kilometers (1,254 miles) of roads, as well as sewage plants, port and warehouse projects and subways.

China’s nickel output including pig iron may fall 3.4 percent to 425,000 tons in 2013, while demand will likely rise 6.9 percent to 770,000 tons, he said. The country’s nickel pig iron output may drop 7.7 percent to 240,000 tons because of lower nickel prices, he said. Pig iron is a substitute made from low-grade ore from Indonesia and the Philippines.

China’s nickel imports will reach a record 345,000 tons in 2013, up 23 percent from this year, Higo said. Japan’s exports will jump 2 percent to an all-time high of 89,000 tons as producers ship more ferronickel and nickel oxide to China, Taiwan, South Korea and Southeast Asia to make up for sluggish demand at home, Higo said.

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