The global nickel market is set to experience some tightness in supplies for smelters starting in 2014, with the potential of increasing pressure on nickel pig iron production in China exacerbating the situation, Joe Belladonna, CFO of Australian producer Western Areas, said Thursday.

"Nickel laterites and nickel pig iron are not capable of filling this sulphide void at a time when the metal is increasingly being recognized and sought for its strategic application in stainless steel and other products with quite extraordinary performance characteristics," he told a conference.

Belladonna expects the "pinch point" for quality nickel sulphide concentrates to occur around 2015.

 

"If you assess the China factor, nickel pig iron in China is expected to plateau at current levels over the next two decades and is not likely to increase at its current pace, into the future -- in an environment where total Chinese nickel demand is expected to rise to nearly 1.6 million mt of contained metal by 2030," he told the Perth conference.

Chinese stainless steel producers are already looking at how they can integrate nickel sulphides into the production process with their nickel pig iron circuits. Belladonna believes that due to these supply dynamics, China's demand for nickel will have to be met by alternate sources of production.

"NPI is already a high cost method of nickel production, and domestic economic forces in China will further adversely impact the economics of maintaining such production," Belladonna said.

With electricity accounting for around 25-75% of NPI production costs and labor costs rising, as are Indonesian ore export taxes, costs could be put under further pressure, which Belladonna said would benefit the outlook for Australian nickel sulphide concentrate supplies in global markets.

Western Areas produces around 25,000 mt/year of nickel concentrate from its operations in Western Australia.