Stainless steel production boosts demand for nickel

Demand for nickel is running higher, buoyed by record production of stainless steel by many major producing nations, Shearson Lehman Securities (formerly L Messel & Co. reports in a recent weekly publication.

In the United States, producers, protected in part by import quotas, are turning out nickel at a higher level than last year, while in Japan producers have found a buoyant demand in the Far East.

A price surge in May pushed nickel past $2(US) per lb, and Shearson foresees that price level being maintained or exceeded during the summer months. Recent spot prices out of New York had nickel in the $2.20 range.

A shortage of stainless steel scrap, affected by the lower primary nickel prices in 1986 and at the beginning of this year, has also increased demand for primary nickel, Shearson reports. No quick correction to this scrap market shortage is foreseen.

Another factor affecting demand has been the minor supply disruptions at Aneka Tambang, Falconbridge, Nippon Mining and Outokumpu. Also, the Soviet Union is reportedly shipping less nickel compared with last year; higher exports from China and Yugoslavia are expected to compensate in part, however.

Nickel averaged $1.76 in 1986 on the London Metal Exchange, down from the 1985 average price of $2.26. The metal is not expected to average $2 or better again until 1988.

In its Annual Review of the World Nickel Industry 1987, Shearson Lehman Brothers forecasts an average price for 1987 of $1.90, and for 1988, $2.10.

World output in 1986, Shearson reports, sunk below 500,000 tonnes for the first time since 1983. Producer problems and also industrial disputes were blamed for the decline. Global output is expected to top the 500,000-tonne level this year.