The financial crisis has seen nickel prices fluctuate wildly. LME prices peaked at just over USD 52,000tn in May 2007, on the back of strong demand and low stocks, but had fallen by over 80% by the end of 2008, as demand collapsed. By the fourth quarter of 2009, however, prices had recovered to USD18,500tn. Data for the first nine-months for 2009 shows nickel consumption at the world level has declined by 9% year-on-year, as end-users aggressively cut inventories. Output of nickel has also declined sharply. For the first three quarters of 2009, nickel mine production fell by 18% year-on-year, while primary production was down by 6%. Producers responded quickly to the fall in demand, with around a quarter of all production suspended during the first half of 2009. While both demand and production of nickel declined in 2009, stocks at the LME built up steadily. At the end of December 2009, official stocks at LME warehouses totalled in excess of 150,000tn. To put this into perspective, when nickel prices surged to above USD 50,000tn, LME stocks totalled 4700tn. The nickel market overall has seen strong growth in demand. For the period 2000 to 2006, when demand peaked, consumption at the world level increased at an annual average rate of 3.8%. Although consumption increased across the world, China exhibited the largest growth. Between 2000 and 2009, its domestic demand is estimated to have risen by an annual average rate of almost 25%. This phenomenal growth has seen China become the world’s largest consumer of nickel. In 1995 China accounted for a modest 4% of world consumption, increasing to almost 30% in 2008. Although global demand for nickel has fallen for three consecutive years, a recovery in the global economy should follow through to see consumption of increase in 2010. Roskill forecasts nickel consumption will increase by around 7% in 2010. The rise in demand for nickel in the coming years is primarily due to an increase in demand for stainless steel. Stainless steel production, the largest end-use for nickel, is forecast to reach 27million tons in 2010 (an 8% increase year-on-year), and almost 30 million tons in 2011. As demand for nickel increases across the globe, production is likely to follow suit. A market surplus of around 75,000tn is forecast for 2010, as output of primary nickel increases to 1.4 million tons. Given the market surplus forecast to develop between 2010 and 2012, nickel prices are expected to be stable. The annual average price in 2010 is forecast to around USD 20,000tn, and expected to rise in both 2011 and 2012. The average price between 2010 and 2012 is forecast at just over USD22,000tn.
