Consumption of nickel is dominated by the stainless steel sector, which accounts for roughly 60% of demand for primary nickel. Market experts agree that over the past five years world output of stainless steel has increased at an average of 10% per year. This increase has been driven by China where growth has averaged over 50% per year over the same period. It is widely believed that China will overtake Japan as the largest primary nickel consuming country, possibly by the end of 2006.

Market forecasters have indicated that the outlook for nickel demand is one of higher than average growth than that for other base metals. If the 5% per year growth in stainless steel production forecast by the International Stainless Steel Forum in 2005 proves to be correct, then demand for nickel in stainless steel is likely to grow at between 3% and 5% over the same period. According to the US Geological Survey in 2005, the world reserve base of nickel is 140mt, which is roughly 100 times annual production in 2004. World mine production totalled 1.32mt in 2004, the highest output ever recorded. 2005 figures remained largely unchanged at 1.26mt, partially lower due to Inco’s scheduled maintenance shutdowns at its Ontario and Manitoba operations.

 

 

 

Nickel prices in 2004 were at their highest level since 1989. For the week ending December 3, 2004, the London Metal Exchange cash price for 99.8% pure nickel averaged $13,895 per metric ton ($6.30 per pound). Twelve months earlier, the cash price was $12,578 per ton ($5.71 per pound). High prices have encouraged substitution of duplex or ferritic stainless for some applications where austenitic was being used. For example, type 201 (3.5% to 5.5% nickel) was being substituted for type 304 (8.0% to 10.5% nickel). Some nickel consumers were concerned that global demand for the metal would outstrip supply before several new mining projects could be completed.