GFMS Metal Consulting forecasts that global nickel demand should be boosted late this year by improved stainless stain production, a tighter scrap market and a slight recovery in the austenitic steel ratio.
It said that "After what will have been three consecutive years of negative growth, GFMS Metals Consulting is projecting a sharp rebound in consumption forecasting increases of 8.7% in 2010 and 9.2% in 2011."
For the year as a whole, GFMS is forecasting an average nickel price of USD 10,450 per tonne. It added that "It should be remembered that such volatility in nickel demand is quite common with double digit gains often posted as the industry emerges from recession."
GFMS research suggests that inventories are fairly close to peaking as the group forecast a 21,000 tonne surplus in 2009. It does not expect to see nickel prices exceed USD 17,000 tonne and predicts average prices should not exceed USD 14,000 tonne during the forecast period.
GFMS believes there is a potential for the stainless steel capacity-which accounts for nearly 70% of nickel demand to rebound sharply at the end of the year. The sharp cuts in production have limited the inventory build and there will be a lot of pent up demand once the economic environment improves.
GFMS said that "Also with nickel prices in our view close to the bottom of the market, the next move in alloy surcharges is likely to be up, which will also help reverse the current destocking mentality. Finally, a possible improvement in credit conditions as 2009 progresses could also encourage some modest rebuild of inventories."