Market Briefing - June 4, 2008

Nickel prices have fallen significantly since our last Base Metals Market Update, with the cash quote dropping to $21,605/tonne at the start of June, for the first time since June 2006. While fund long liquidation and the recent rebound in the US dollar have contributed to the decline, the slow recovery of the stainless steel sector is the main factor to undermine the market. The monthly average for nickel in May came in at $25,735/tonne.

Meanwhile, LME stocks have continued to decline and are currently 47,940 tonnes on June 2. Theoretically, this should provide some support to prices, however, it seems that weak demand, is outweighing any decline in inventories, particularly as they remain high. GFMS Metals Consulting has revised its supply-demand balance analysis and price forecasts for 2008.

WBMS reports the nickel market in a deficit in Q1
According to the WBMS, the global refined nickel market recorded a deficit of 9,300 tonnes in Q1 2008. The organisation estimates world demand fell by 12% y-o-y to 330,900 tonnes, while world production declined by 8% to 321,600 tonnes over the first three months of the year. In its production figures, it noted that nickel pig iron in China has been falling in the last few months due to lower availability of imported feed material (see below for more details). GFMS Metals Consulting believes the data overstates the decline in output, particularly in China. We retain our view of a small surplus in Q1.

> This article gives the introduction to our latest detailed analysis on the market. In order to receive a free copy of the Base Metals Market Briefing, please contact: info@gfms-metalsconsulting.com.

Disclaimer: Whilst every effort has been made to ensure the accuracy of the information used in this document, GFMS Metals Consulting cannot guarantee such accuracy and GFMS Metals Consulting does not accept responsibility for any losses or damages arising directly, or indirectly, from the use of this information.