So what conclusions are we to from this presentation about the long term supply and demand outlook for nickel. Well, I think the first and most important one is that there is insufficient new nickel mine capacity coming on stream between now and 2010. Consumption growth for both nickel and stainless steel are likely to resume their long term patterns during 2003. We think 2002 is virtually a write off with sideways to lower nickel prices quite likely. So for the 2003 to 2006 period we should experience a period of highish average nickel prices. By highish, I mean cash LME annual averages running at between 6,500 dollars and 7,500 dollars a tonne for the period. We absolutely disagree with the super bullish forecasts which look for annual averages of 8,500 dollars to 10,000 dollars a tonne. These forecasts are much too optimistic, in our opinion, because they seem to ignore a suitably large scrap supply response such as we saw in 2000. There is certainly no shortage of scrap available. And to assume, as some commentators do, that it won't be available is to assume that the basic laws of economics cease to function. Secondly, it shouldn't be forgotten that nickel producers themselves are likely to carry on producing metal regardless next year so that we will enter 2003 with a much higher ratio of stocks to consumption than we have now. At the end of second quarter of this year, LME stocks, producer stocks, and consumer stocks totaled an estimated 119,900 tones or the equivalent of 45 days of consumption, according to Brook Hunt. It would not surprised us in the least to see estimated stocks rise to 220,000 tonnes or 90 days of consumption by the end of 2002. Thirdly, stainless steel stockists and distributors in Europe and Asia are likely to enter 2003 still holding quite high levels of stocks. We think 2002 will be a poor year in which to run off completely excessive stock levels. These stocks will also act as a cushion when demand does pick up again and blunt the impact on nickel prices for time. Fourthly, such high average prices are likely to produce big substitution effects or a buyers' strike for many applications. And what about a forecast for next year? Well, the secret to forecasting, as the former chief economist of RTZ once told me, is to do it often! So on the 18th of October, I can say with some confidence that I would expect to see the cash LME nickel price average around 5,000 dollars - 5,500 dollars a tonne (227 cents a lb to 249.5 cents a lb) next year. That compares with a year to date average of around 6,248 a tonne (283.4 cents a lb). Finally, Ladies and gentlemen, if you would like to receive these power point slides in glorious colour as opposed to the black and white of the hand outs, please give me or my colleague Keith Richardson your business card and we will e-mail you a set.
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