"Nickel has quietly been consolidating a bottom to its price trough these last few months. Following a calamitous fall from USD 8.80 per pound at the start of September to nearly USD 4 per pound in late October 2008, the metal bottomed out at an average around USD 4.50 per pound since. Bouncing around on good news and bad, dollar fluctuations and financial scares either side of this number it has been particularly stable in March 2009.

Yet at the same time, LME stock levels have continued to rise from 78k tons in January to nearly 107,000 tonnes now. Not a huge rise you may say when looking at many other metals but significant in that it has failed to depress the price. Moreover, stainless production and prices have continued to contract in the face of weak demand stainless steel and alloys account for 87% of nickel demand according to some sources.

Deutsche Bank is suggesting stainless demand will continue to grow by 7.2% per annum led by China with a 20% growth into 2010. But the same report is suggesting growth in North America and Europe will be 2.8 to 4.0% which we cannot see this year so we take that global projection with caution.

However the wider market does appear to feel that supply and demand is coming closer into balance in spite of the gradually rising inventory levels. If they are correct then we could see nickel prices firming later in the year or early next year. We cannot see a supply side crisis that would justify a dramatic price rise but for consumers able to predict forward demand the second quarter may not be a bad time to be covering a percentage of forward requirements for 2009-10.

(Sourced from www.agmetalminer.com)