Tue, Jun 2, 2009

Featured, Nickel Articles

By Leia Michele Toovey- Exclusive to Nickel Investing News

On Monday, Nickel prices extended last week’s rally; as positive manufacturing data out of China, the world’s third largest economy lifted the base metals. Extra impetus came as the weakening greenback made nickel more economical for holders of other currencies.

Many analysts are still trigger shy at claiming the recovery is here, despite the continuing stream of data that points toward relief from the crisis, after the rapid slump altered expectations of how a recession should unfold. For the analysts that care to voice their opinion, there is a contrast in expectation. ”The market continues to buy the recovery story, as economic data suggests that the worst is behind us,” suggests analyst David Thurtell at Citigroup in London, as “investment money continues to pour into the complex.” However, an MF Global analysis points out that the price advances “are occurring in spite of either bearish or neutral fundamentals in metals.” the markets are vulnerable to any disappointing economic news and therefore trading is likely to remain volatile.

Nickel futures inched up in early Monday trade on the MCX. At 11:00 nickel for the July-month contract was up 0.76 per cent. Nickel for delivery in June traded heavily and moved up 0.65 per cent to Rs 661.80 per kg. LME nickel stocks have fallen sharply since late April, when they reached above 114,400 tonnes. In April, Chinese nickel imports hit a monthly record of 21,031 tonnes. On the LME nickel rose and crossed the key technical level of $14,000. So far the metal is up around 19 per cent in both April and May.

Company News

Sumitomo Metal Mining Co. Ltd. has completed the $500-million upgrade of its nickel processing plant in Palawan, finally starting full commercial operation, a company official said late last week. The plant is now at full capacity, and will produce nearly 20,000 tonnes of nickel per year, double its previous throughput. In 2006, Sumitomo Metal Mining spent $308 million to increase the plant’s production, more than double the $180-million cost of the first plant. The plant initially produced 5,000 metric tonnes of nickel per year when it began commercial production in April 2005.

Negotiations resumed on Monday, between Vale Inco, and Voisey’s Bay nickel mine union representatives. A bonus tied to the price of nickel is a key element in the bargaining, said Boyd Bussey, a negotiator with the United Steelworkers union. “It’s something that would be considered sacred now and would certainly cause a strike,” said Bussey. This is not the first time the bonus has caused labour tensions. In the summer of 2006, workers went on strike for 8 weeks, and the mine’s production came to a halt. Due to the low price of nickel on the world market, Vale Inco is in no rush to strike a deal. While the company wants to seek concessions, the union is open to seeking a continuation of the status quo. Workers have been without a collective agreement since March. “If they’re interested in extending the contract or something to get over the bad economic times, that’s something that we could look at,” said Bussey, who acknowledged that the current economic crisis is a significant factor at the bargaining table.

The world’s largest nickel producer, Norilsk Nickel, made a $449 million net loss in 2008 after taking a $4.7 billion write down on assets. The loss, which followed net profit of $5.3 billion a year earlier, came as base-metals prices almost halved and the market stagnated. “The main factor in this was a substantial decrease of sales prices for nickel,” the firm said in the statement. Norilsk also reported an 18 per cent drop in revenues, equal to approximately $14 billion. The company said impairment of non-financial assets amounted to $4.7 billion in 2008. The impairment charge includes $2.5 billion on assets acquired when the company bought Canada’s LionOre Mining International. Norilsk also reported a foreign exchange loss of $397 million in 2008. Norilsk’s earnings before interest, taxes, depreciation and amortization, or EBITDA, fell by almost half compared to the year before to $5.8 billion.