Global 2011 Nickel Supply Surplus Likely 10,000 Tons -Metalytics

Global primary nickel demand is likely to rise 7.7% to 1.58 million tons this year, while supply growth is expected at 10.1%, leaving the market with a supply surplus of 10,000 metric tons, the director of consultancy at Metalytics Australia said Wednesday.

The growth in supply is mainly due to ramp-ups of large laterite projects, such as Vale SA's (VALE) Goro project in New Caledonia, Anglo American PCL's (AAL.LN) Barro Alto project in Brazil and Vale Inco's Onca Puma project in Brazil, which have a combined capacity of 155,000 tons, John Barkas said during an industry conference in Shanghai.

China's production of nickel pig iron, a cheap but less efficient substitute for nickel, which is approaching 200,000 tons in capacity this year, may also be a factor in pushing the market into a surplus, he said.

The consultancy expects the cash price of nickel on the London Metal Exchange to average $25,353/ton this year, Barkas said.

Growth in global nickel demand is projected to slow to 5.5% to 1.667 million tons next year, while supply is expected to rise 6.9% to 1.7 million tons, translating into a surplus of 33,000 tons, he said.

-Yue Li contributed to this article; Dow Jones Newswires; (8621) 6120 1200; [e-mail]