Nickel prices may have bottomed out

Global nickel prices may have hit bottom and production cuts could hasten a recovery in the metal that has lost nearly a third of its value this year, the CFO of the Philippines' top nickel ore miner said.

"It's likely that we've already seen the bottom this year, so there could be potential upside next year," Emmanuel Samson, chief financial officer of Nickel Asia Corp, told the Reuters Global Commodities Summit.

"It's difficult to imagine that prices are sustainable at current levels considering an estimated 60 percent of producers are losing money today. Of course, if some producers cut production that would definitely help prices recover faster."

The price of refined nickel, used to make stainless steel, has fallen 31 percent on the London Metal Exchange this year, reflecting weaker demand in top consumer China.

The Philippines became the biggest supplier of nickel ore to China after Indonesia banned shipments in January 2014. Nickel ore is used to make nickel pig iron (NPI), a cheaper substitute for refined metal in producing stainless steel.

Nickel ore miners are faring better than refiners, Samson said, with current ore prices still higher compared to levels prior to the Indonesian ban. LME nickel has dropped about 30 percent to around $10,450 a ton over the same period.

Chinese growth of between 6 percent and 7 percent should be enough to sustain the country's stainless steel demand at around current levels, maintaining appetite for Philippine nickel ore, he said.

China on Monday reported thirdquarter economic growth of 6.9 percent, its slowest quarterly expansion since 2009.

Samson said the Philippines could not fully meet China's demand for nickel ore, as it lacked big volumes of highgrade material that Indonesia used to supply.

Stocks of Indonesian ore in China, piled up just before the ban took effect, were expected to be depleted by year-end.

"NPI producers in China will be completely dependent on Philippine ore, which is not sufficient to cover NPI capacity. Chinese stainless steel producers would have to rely more on other sources of nickel such as ferronickel or pure nickel," said Samson.

Nickel Asia, partly owned by Japan's Sumitomo Metal Mining Co. Ltd., is keen to acquire more assets, but is keeping its sights at home. The miner said in April it would acquire stakes in two smaller miners to expand its resource base by 24 percent.

"We are always on the lookout for new nickel properties locally," Samson said.