Mining Firm Sees Low Nickel Demand

Canadian mining company Falconbridge Ltd., which is seeking to develop new nickel mines in New Caledonia and Indonesia, said on Sunday that demand for nickel remains weak.

Falconbridge has signed a tentative agreement with Australia’s BHP Ltd. for a 37.5% interest in the undeveloped Gag Island deposit in Indonesia.

It also expects to make a development decision for its Koniambo joint venture in New Caledonia in 2003, Bruce Dumville, project director of Falconbridge Nouvelle Caledonie, said in a paper to be delivered today at an industry conference.

“In nickel, demand remains weak as the economy continues to struggle,” Dumville said.

By 2003, a global shortfall in nickel production could exist, based on long-term demand growth projections of around 4%--45,000 tons--a year, said Macquarie Bank commodities analyst Jim Lennon.

“The short-term outlook for the next six months or so is not so great, but longer term we see nickel demand growing 4% a year,” Lennon said.

The market for nickel is forecast to grow to 1.7 million tons by 2005, up from 1.1 million tons in 2000 and about 400,000 tons more than existing operations and committed new projects can supply, Lennon said.

“Unless more projects are given the green light, the industry could be headed for a production shortage,” Lennon said.

Australian projects--Anaconda Nickel Ltd., Centaur Mining & Exploration Ltd. and Preston Resources Ltd.--were scheduled to produce a combined 60,000 tons.

But financial and technical setbacks, including a lack of commercially viable technology to cheaply extract nickel from laterite ore, have left each of them below design capacity.

A slowing of exports from Russia and less metal returning to the supply pool from scrap merchants should help revitalize the nickel market at some point, Dumville said.

He said he was encouraged that stocks of nickel held by the London Metal Exchange had not increased in spite of slow demand.