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Nickel In Oversupply



June 20, 2008 – Comments (0)

One of the things that I said about nickel when it was on its ascent to the stars in price is that in terms of base metals nickel is one of the smallest markets and easiest to manipulate.  Out of all the base metals nickel did the most stellar ascent reaching about $50,000/ton.

Before energy prices took off, but while ore prices were still very high, China was able to import nickel ore and use a different processing method that in the past had been unprofitable due to energy costs and they were able to produce nickel for about $8/lb.  I suppose with the 18% increase in energy costs this week that process just jumped to at least $9/lb. 

According a Bloomberg article world nickel consumption fell by 0.9% in March.  Production, on the other side, grew by 6.5%, lead by Canada.  That does not bode well for nickel price.  Nickel stocks are likely to be hammered more as margins are squeezed.

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