Nickel Will Fall Most as Metals Retreat in 2008, Survey Shows

Nickel Will Fall Most as Metals Retreat in 2008, Survey Shows
(http://www.bloomberg.com/apps/news?pid=20601087&sid=atqT00H5NRhI&refer=home)

By Chanyaporn Chanjaroen

Dec. 31 (Bloomberg) -- Nickel will lead a decline in industrial metals next year as stockpiles expand and demand slows with the U.S. housing market, a survey of analysts showed.

Nickel for immediate delivery will average $29,500 a metric ton next year on the London Metal Exchange, according to the median of 19 analysts surveyed by Bloomberg News this month. The price is 21 percent below this year's average and 46 percent less than the record set in May. Lead will be the best performer for a second year, with a 4 percent gain, the survey showed.

Industrial metals are falling for the first time since 2001 as the deteriorating U.S. housing market curbs demand for copper, zinc and tin. Copper inventories increased 8.5 percent this year and are four times higher than at the end of 2004, LME data show.

``The U.S. housing market won't turn around until the first quarter of 2009, and that will be difficult for base metals,'' said Bill O'Neill, a partner at Logic Advisors in Upper Saddle River, New Jersey. O'Neill gave the most accurate forecast for nickel this year among 28 analysts surveyed by Bloomberg.

The five-year rally generated record profits for Melbourne- based BHP Billiton Ltd. and Rio Tinto Group, based in London. The gains also prompted $156.4 billion of mergers among mining companies this year.

Nickel is the second-worst performer among the six metals traded on the LME, falling 21 percent to $26,450 a metric ton. Zinc fell the most, losing 43 percent to $2,425 a ton.

Nickel Stockpiles

LME-monitored stockpiles of nickel, mostly used in stainless steel, surged almost sixfold this year. The slump in prices prompted steelmakers including Dusseldorf-based ThyssenKrupp AG to write down the value of inventories.

Lower prices failed to curb supply. Production will probably exceed demand by 100,000 tons next year, according to Alan Heap, director of commodity analysis at Citigroup Inc. in Sydney. That's more than twice the metal held in warehouses monitored by the LME.

Heap expects nickel to average $22,046 a ton next year, the lowest forecast among the analysts surveyed.

Not everyone is as pessimistic.

``We've seen the worst in nickel,'' said Jon Bergtheil, head of global metals strategy at JPMorgan Securities Ltd. in London. He estimates miners will produce 16,000 tons more than consumers require in 2008, compared with 25,000 tons this year, because Chinese demand will jump 23 percent, compensating for slower growth in the U.S., Japan and Europe.

Limited Growth

Copper for immediate delivery will fall 2.3 percent to an average $6,975 a ton next year, based on the median estimate in the survey.

The combination of limited supply growth and labor strikes may send prices as high as $12,000 a ton, said Jeremy Gray, an analyst at Credit Suisse Group in London. Gray said in January copper would average $7,164 this year, $22 more than the actual average. Benchmark three-month copper reached a record $8,800 in May.

Mines will expand no more than 2.3 percent next year, Gray said. An increase of 1.5 percent would fall short of demand, he said.

Supplies from Codelco, the world's largest copper producer, dropped in the first nine months because of a strike and aging facilities. Workers at Grupo Mexico SA, the country's largest copper miner, have been on strike for four months.

             Aluminum   Copper   Lead    Nickel   Tin     Zinc

ABARE        $2,365     $7,100   N/A     $27,500  N/A     $1,780
ABN Amro     $2,315     $6,944   $2,315  $26,455  $14,330 $2,425
ANZ          $2,590     $7,165   $3,152  $30,820  N/A     $2,740
Barclays     $2,838     $7,800   $2,200  $29,875  $15,050 $2,800
BNP          $2,545     $6,940   $2,450  $27,750  $18,125 $2,375
Citigroup    $2,646     $7,716   $3,042  $22,046  $11,023 $2,756
Commerzbank  $2,900     $6,400   $2,800  $24,000  $15,000 $2,600
CPM          $2,680     $6,875   $2,340  $30,275  $15,000 $2,510
Credit
Suisse      $2,535     $6,614   N/A     $33,069  N/A     $2,646
Deutsche
Bank        $2,800     $7,330   $2,260  $32,794  $12,208 $2,921
EIU          $2,665     $7,253   $2,697  $29,983  $14,109 $2,729
Goldman
Sachs      $2,488     $7,500   $2,969  $25,250  N/A     $2,413
JPMorgan     $2,315     $6,950   $2,700  $29,000  $12,375 $2,900
Logic
Advisors   N/A        $6,637   N/A     $29,500  N/A     N/A
Merrill
Lynch      $2,588     $6,800   $3,073  $36,875  N/A     $3,125
RBC          $2,425     $6,614   $2,205  $30,864  N/A/    $2,576
Sanford C.
Bernstein    $2,455     $6,600   $2,575  $23,500  N/A     $2,575
UBS          $3,086     $7,165   $2,866  $29,211  $10,858 $3,307
Unicredit    $2,800     $7,000   N/A     N/A      N/A     N/A
Westpac      $2,750     $7,900   $2,700  $31,375  N/A     $2,850

Median       $2,590     $6,975   $2,698  $29,500  $14,665 $2,735
Year-to-date
 Average* $2,642     $7,142   $2,594  $37,177  $14,478 $3,264
Change       -2%        -2.3%     4%     -21%     1.3%    -16%

* Year-to-date average through Dec. 27, 2007.

To contact the reporter on this story: Chanyaporn Chanjaroen in London at cchanjaroen@bloomberg.net

Last Updated: December 30, 2007 19:18 EST