Western nickel demand set to grow further

Over the past two years, demand for Western World nickel has expanded by almost 20%, and this trend is expected to continue, according to a study by AME Mineral Economics entitled Gearing for Growth.

The increase is largely due to a surge in production of austenitic stainless steel. Nickel consumption is still dominated by the U.S. and Japan, which, together, will account for nearly half of consumption this year.

But the study suggests that nickel’s longer-term growth prospects will be fueled by the fast-developing economies of Southeast Asia.

While Western primary nickel consumption is expected to grow by an average of 2.8% per year over the next decade, the average annual growth rate in developing Asia will be 8%. Moreover, consumption in China is expected to double by the year 2005, reaching a projected rate of 100,000 tonnes per year.

The study concludes that, as the industry “gears for growth,” expansion projects will ensure that production capacity meets projected demand. The authors warn, however, that there is some danger of overcapacity if the next economic downturn is a deep one.

By 2005, world nickel demand is expected to have reached 1.2 million tonnes per year, of which 1 million tonnes will be consumed in the present Western economies.

In 1994, the average cash cost of nickel produced in the West, net of byproduct credits, was about US$2.03 per lb. Cash costs have fallen over the past two years, largely because low-cost operations have expanded.

The study suggests that over the long term, costs will be driven down by several factors, including new smelting technology, although this prediction is complicated by rapidly changing exchange rates.