Vale’s New Caledonian Nickel Output Set to Resume Within 10 Days

Nickel production at Vale SA’s plant in New Caledonia, holder of the world’s second-biggest reserves, is set to resume within 10 days after the company received government permission to restart operations.

The facility will be restarted in a step-by-step manner, Cory McPhee, a Toronto-based spokesman, said in an e-mail today. Operations stopped after an acid solution spill, the Rio de Janeiro-based company said May 8. The world’s second-biggest nickel producer received permission to restart the plant, it said May 30. New Caledonia in the Pacific Ocean holds about 16 percent of the global reserves, according to the U.S. Geological Survey, second only to Australia.

Nickel surged to a two-year high in May as the shutdown added to mounting global supply concern after Indonesia, the world’s biggest supplier, banned ore shipments earlier this year. Vale planned to produce more than 40,000 metric tons this year at the New Caledonia site, formerly known as Goro, the company said in November. Prices are up 37 percent this year as Macquarie Group Ltd. to Citigroup Inc. predict global deficits.

“The restart should put some downward pressure on the price,” said David Lennox, a resource analyst at Fat Prophets in Sydney.

Nickel for delivery in three months dropped 0.4 percent to $18,945 a ton today on the London Metal Exchange, down for a third day. Prices reached $21,625 on May 13, the highest since Feb. 10, 2012. The metal is one of the top three commodity picks for the second half as the ban shifts the market from a structural oversupply to balanced this year, Societe Generale SA, said yesterday.

Demand for refined nickel will exceed supply by 36,000 tons this year and 131,000 tons in 2015, Macquarie said May 16. Citigroup estimates global mined production at about 1.9 million tons, from 2.3 million in 2013.

The impact of Indonesia’s ore ban on the nickel market was akin to how oil buyers might respond to a halt in supplies from Saudi Arabia, Citigroup said May 21, predicting deficits from next year to 2018.

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