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Nickel Market Prospects. ISRI Spotlight on Nickel/Stainless April 2006. Source: Macquarie Research. Macroeconomic: Global Economic Outlook. Source: Economy.com March 06. Q4 2005 Bottom?. Demand: The Stainless Steel Cycle-Technical Analysis. Stainless Steel Scrap Market.

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nickel market prospects
Nickel Market Prospects

ISRI

Spotlight on Nickel/Stainless

April 2006

macroeconomic global economic outlook
Macroeconomic:Global Economic Outlook

Source: Economy.com March 06

demand chinese nickel consumption
Demand: Chinese Nickel Consumption
  • 26% annual growth rate since 2000
  • 11% of overall nickel consumption

Net Import Requirement

nickel market balance
(Thousand Tonnes)

200420052006

Supply Growth (%) +4.2 +0.8 +6.1

WORLD SUPPLY 1,271 1,281 1,359

Demand Growth (%) +0.5 -1.5 +7.3

WORLD DEMAND 1,2861,2661,359

BALANCE -15 +15 0

Stocks

LME 21

Producer 93 __ __

Total 114 129 129

Nickel Market Balance
lme nickel price jan 87 feb 06
LME Nickel Price Jan/87 - Feb/06

33 consecutive

months of $4/lb.+

Nickel prices

since June’ 03.

22 consecutive

months of $4/lb. +

nickel prices in the

late 80’s.

worldwide nickel exploration budgets
Worldwide Nickel Exploration Budgets

+200% increase in nickel exploration spending

44% decline in nickel exploration spending

Source: Metals Economics Group

major nickel projects commissioned last 10 years
PROJECTDISCOVEREDEXPLOREDACTIVATEDCOMMISSIONEDCAPACITY

Loma de Niquel 1940 1960s 1991 2000 19,000

Murrin Murrin 1964 1970-80s 1993 1999 40,000

Raglan 1930’s 1957 1994 1998 26,000

Voisey’s Bay 1993 1993 1996 2005 60,000

Major Nickel ProjectsCommissioned Last 10 Years
nickel c1 costs
Nickel C1 Costs

~ 46% increase

Source: Brook Hunt

capex cost pressures
ORIGINAL C URRENT CAPEX/LB.

PROJECTCAPEXCAPEXCAPACITY ANN. PROD’N. PROD.

Goro $1,400 M $1,880 M 60,000 t $14.21/lb

Ravensthorpe $700 M $1,800 M 50,000 t $16.33/lb

Koniambo $1,540M $2,200 M 60,000 t $16.63/lb

Ambatovy $1,600 M $2,250 M 60,000 t $17.01/lb

Capex Cost Pressures
slide18

According to a survey carried out by Morgan Stanley investment funds which are investing in commodities are expected to double their financial resources within the next FIVE years!

Source: Barclays Capital

analyst s reuters poll nickel price forecasts
Analyst’s Reuters Poll: Nickel Price Forecasts

US$/lb

2006 January 2006 2007

Mean $5.82 $5.33

High $6.65 $7.50

Low $4.54 $3.63

Range $2.11 $3.87

LME Average 2005 $6.68

LME Average 2006 Year to Date $6.70

take aways
Take-Aways………..
  • Positive macroeconomic outlook.
  • Funds viewing metals complex “favourably” and see the market as being “stronger for longer”.
  • Current stainless steel de-stocking phase is cyclical…..the market will turn around and when it does it will come roaring back.
  • Non-stainless demand will continue to remain healthy.
  • Inventories, despite trending upwards, are low by historical standards.
  • Strong Chinese demand and constrained supply (technical glitches, strikes, etc.)
  • All these factors point to another strong year for the nickel market in 2006.
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