Poseidon's Singleton Says Nickel Price at `Bottom of Curve'

By Jason Scott and Bernie Lo

Sept. 10 (Bloomberg) -- David Singleton, the chief executive officer of Poseidon Nickel Ltd., an exploration company chaired by Andrew Forrest, Australia's richest man, says nickel prices will recover as China increases its steel-making capacity.

Nickel prices have tumbled 64 percent since hitting a record of $51,800 a metric ton on May 9, 2007. The metal dropped 1.9 percent to close at $18,500 a ton on the London Metal Exchange yesterday. About two-thirds of nickel production is used to make stainless steel.

Singleton was speaking in an interview on Bloomberg Television.

On nickel prices:

``We're having the bottom of the curve that we always were going to have when we had such high nickel prices at the beginning of last year. We hit $50,000 a ton in the early part of 2007. We're down to under $20,000 a ton at the moment.

``Nickel's quite susceptible to highs and lows and we'll see that for some while. I think the key thing is nickel is still two to three times its long-term average price so that's a good thing for the industry.''

On Chinese capacity:

``The Chinese are where they were only six months ago, and that's means we're still seeing steel production continuing to rise. Steel production is linked to stainless steel and that's where most of the nickel goes and therefore we'll continue to see an upsurge in nickel production over the next 10 years.

``In 2007 there was a 27 percent increase in stainless steel capacity in China and that was too much in one year when there's been an average year-on-year growth of about 7 percent. So what we're seeing is a bit of production capacity coming off in China, while the market catches up with that supply. As growth continues in that country, we'll see that 27 percent capacity come back on to the market and we'll see the nickel price move at the same time.''

On sulphur prices:

``Some of the companies around the world that are quite inefficient in the production of nickel are suffering quite a bit. The other factor for some companies is the use of sulphur, and we've seen sulphur prices move from $50 a ton to more recently $800 a ton. The Chinese started using it in large quantities as fertilizer, as they developed their food industry, and what we're seeing is something that used to be thought of as a waste product now being thought of as a commodity.''