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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 the stainless steel cycle technical analysis

Q4 2005 Bottom?

Demand: The Stainless Steel Cycle-Technical Analysis




Non stainless demand
Non-Stainless Demand

Source: NiDI


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 (Thousand Tonnes)

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 (Thousand Tonnes)

+200% increase in nickel exploration spending

44% decline in nickel exploration spending

Source: Metals Economics Group


Major nickel projects commissioned last 10 years

PROJECT (Thousand Tonnes) DISCOVEREDEXPLOREDACTIVATEDCOMMISSIONEDCAPACITY

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


Project timing
Project Timing (Thousand Tonnes)


Nickel c1 costs
Nickel C1 Costs (Thousand Tonnes)

~ 46% increase

Source: Brook Hunt


Capex cost pressures

ORIGINAL C URRENT CAPEX/LB. (Thousand Tonnes)

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


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 investment funds which are investing in commodities are expected to double their financial resources within the next 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……….. investment funds which are investing in commodities are expected to double their financial resources within the next

  • 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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