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Thursday, May 12, 2005

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Nickel price may increase further

G. Chandrashekhar

Mumbai , May 11

TIGHTNESS in the nickel market is set to continue because of a combination of supply and demand factors.

This is likely to encourage the price prospects in the base metals complex given nickel's price leading abilities in the past, experts said.

Major producers are unable to take advantage of supply tightness for various reasons including infrastructure problems, maintenance shutdown, labour contract negotiations and so on. Warehoused inventory levels are shrinking.

Although demand from the stainless steel industry has softened recently partly because of high prices, import demand from China remains robust after a lengthy period of de-stocking at stainless steel mills last year.

Currently, the metal is trading at around $16,750 a tonne and the market is in backwardation ($1,000 a tonne cash third month) with stocks at LME less than 3,000 tonnes.

A break above the technical resistance of $17,050 a tonne will be required for nickel to form the next leg higher at $20,000 a tonne, but that threshold level looks distinctly under threat, according to Ms Ingrid Sternby, base metals analyst with Barclays Capital.

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