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In reply to: nizar on Friday 15/06/07 03:23pm

Nizar/ZAaitech...you guys just trading this or keeping parcels? still in? looking at getting in...i see 19.5 cents a sa barrier but think once we get a bit more positive news we'll move to the next level ...mid 20's. Who concurs? http://www.sharescene.com/html/emoticons/wacko.gif

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Demand woes hit nickel prices

Slide to five-month low as Chinese stainless steel producers likely to cut output

ANGELA BARNES

 

INVESTMENT REPORTER

 

June 21, 2007

 

Nickel prices slid to a five-month low yesterday and are poised to head lower on reports that several major Chinese stainless steel producers are about to cut output.

 

Stainless steel producers account for about two-thirds of the demand for nickel. The official cash settlement price dropped 24 cents (U.S.) to $17.56 a pound yesterday on the London Metal Exchange - the only exchange it trades on - after falling more than 6 per cent on Tuesday, the biggest decline in nine months. The price peaked at $24.59 on May 16.

 

Even the current levels are "quite extraordinary," said Patricia Mohr, vice-president and commodities expert at Bank of Nova Scotia. The previous cycle in the late eighties saw nickel top out at $10.88.

 

She attributes the correction to several factors, not the least of which are trading rule changes implemented by the LME's compliance department. The change required traders with major long positions to make more metal available to borrowers to increase liquidity. The exchange said that the amendment to the lending guidance instituted on June 7 was done in hopes of preventing "disorderly" market activity.

 

 

The change boosted LME inventories of the metal a little, but the bigger factor is that demand for nickel from stainless steel producers may be moderating.

 

Three major Chinese stainless steel suppliers - Taiyuan Iron & Steel (Group) Co., Baoshan Iron & Steel Co. and Zhangjiagang Pohang Stainless Steel Co.- are believed to have agreed over the weekend to lower their combined output by at least 20 per cent next month.

 

A Barclays Capital report foresees further weakness in the nickel price. "We continue to expect further downside risk to nickel prices on the back of easing fundamentals and believe that the correction in prices has further to run," the report said.

 

Bart Melek, global commodity strategist at BMO Nesbitt Burns Inc., also expects the pressure on nickel prices to continue into the third quarter. Beyond that, however, he believes prices will rebound.

 

"Since demand will pick up later in the year and outpace supply for the next few quarters once again, the correction will be modest by historic norms (with prices likely down a modest 10-15 per cent from yesterday's prices) and of a temporary nature," he wrote in a market comment yesterday.

 

Ms. Mohr's read on the near-term situation is similar to that of Mr. Melek. She believes the easing of pricing is likely only temporary, noting that demand for nickel usually slows over the summer. "It probably will pick up again in the fall," she added.

 

Furthermore, she is upbeat about the longer-term outlook for nickel.

 

"I expect nickel prices to remain in the teens for the next couple of years," she said. The new mine production that is scheduled to come on stream over the next two years is "quite limited," she noted.

 

"There is tremendous demand for stainless steel around the world and a lot of that demand is for high-specification stainless steel using nickel," she said. That demand has come about because of the boom in investment in things like petrochemical plants, bitumen upgraders and aircraft orders.

 

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In reply to: Park-Hall on Friday 22/06/07 05:49pm

all sounds very good to me. nickel in the teens will make AUZ a very rich company indeed, as well as its share holders. Medium term that is ....... 1-2 years.

 

cheers PC

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In reply to: nizar on Wednesday 20/06/07 11:12am

Nizar...u still in?...interest is lacking and no news...could head lower...might have to pick up a few more soon....do ya think we'll hit 12c again http://www.sharescene.com/html/emoticons/sadsmiley02.gif

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In reply to: grommit on Monday 09/07/07 11:54am

AUZ'ers...we need some news.....disappointed by current SP but with nickel in the doldrums atm we may see this one go even lower...tempted to throw the money elswhere...ripper of a day today with NWE/PPP/SAU all in the green!! much happier today!

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