Supply Surplus Likely To Keep Tarnish On Nickel—BNP Paribas

Nickel is heading into a period of structural supply surplus and will also be affected by the vagaries of the global economy, according to BNP Paribas. “We continue to forecast a physical surplus in 2012 of 50,000 (metric tons), but this is subject to growing uncertainty,” says Stephen Briggs, senior metals strategist at BNP Paribas. He says although both demand-side and supply-side risks are tilted to the downside, production will depend greatly on the nickel price and vice versa. Briggs says in relative performance, nickel's fundamentals are particularly weak compared with those of copper and tin. “We expect tin's premium over nickel to widen again to at least USD 5,000/t and the nickel/copper price ratio to continue to trend towards 2:1,”  he says. “Nickel may underperform tin even if the economic/financial environment deteriorates more than expected. But in that case, copper might be more exposed than nickel as the copper price is still far above production costs. The nickel/copper price ratio might then rise instead.”