NONFERROUS - "NICKEL MARKET WON'T BE BALANCED FOR ANOTHER 5 YEARS" SAYS SHERRITT EXEC
NEW YORK -The world nickel supply won't be balanced with demand for another five years due to reported production delays at new nickel projects, according to Jowdat Waheed, president and chief executive officer of Toronto-based, Sherritt International Corp. "What I've seen in the last six months is that all of the announced significant capacity additions have been delayed significantly," Waheed told investors at Desjardins Securities' Materials Conference in Montreal .
The commissioning of Cia. Vale do Rio Doce's 60,000-tonne-per-year Goro nickel project in New Caledonia has been pushed back to the end of 2008, the Brazilian company said in late November, and the cost of the delayed project had increased by 40 percent to $3 billion from the initial projected cost of $2.15 billion (AMM, Nov. 29).
In addition, BHP Billton was forced to push back the start date at its Ravensthorpe Nickel project in Western Australia to the first quarter of 2008, about three months later than expected. The company also will be spending about 64 percent more on the project's development, with a new cost estimate of $1.34 billion. The delay and increased cost of the project were attributed to lower-than-expected labor productivity and the late delivery of some materials and equipment, BHP said.
The Raventhorpe delay is the second setback for BHP in recent months. The company reported that its Queensland Nickel refinery in Australia was operating at only half of capacity in late July.
Such production delays should support the supply deficit and higher nickel process in the coming years, Waheed said. "If the same trends continue for the other announced capacity additions, whether it is in Madagascar or Brazil , then we are five years away from a reasonable balance of supply and demand in the nickel world," he added. With nickel prices reaching new highs, some sources have speculated that larger companies such as Sherritt might consider hedging the metal. But Waheed put such speculations to rest. "If someone wants to step up and buy nickel for the next 15 years at $15.50 (a pound), then consider it sold. There aren't too many players who will buy nickel for a fixed price for that long. Hedging nickel is a pipe dream."
Three-month nickel ended Thursday's final kerb session on the London Metal Exchange at $33,700/$33,750 per tonne (bid/ask), down from the previous day's final kerb close at $34,200/$34,300.