Potential Severe Nickel Shortage for Japan Manufacturers

Japanese nickel supply is short in the distributors’ market when the import from Canada keeps very low. The supply is very tight especially for plating, battery and powder metallurgy. Smaller buyers cannot secure the requirement while major buyers can keep the operation with inventory and long term purchase contract. The short supply could impact on downstream industry including automobile and appliances.

Plating makers use button type or pellet or powder nickel due to the easy melting while stainless and special steel makers use flat type of nickel. The pellet nickel users heavily depends the supply on Vale Inco’s Copper Cliff Nickel refinery while powder nickel users depends on high grade powder from Vale Inco. Strike since last summer at Copper Cliff Nickel reduced the supply for Japanese users.

Japanese import of Canadian nickel powder decreased to 26 tonnes in January and 24 tonnes in February compared with monthly averaged around 200 tonnes from January-August 2009. Japanese plating industry is estimated to use 4,000-5,000 tonnes of nickel per year while Sumitomo Metal Mining supply monthly 100 tonnes of button type of nickel. Sumitomo Metal Mining cannot meet the demand. With the low level of import from Canada, the plating nickel supply could be short at 1,000-2,000 tonnes annually.

Some buyers try to secure Vale’s nickel from Chinese suppliers at higher price. A rare metal trader said the offer is 4,000 yen per kilogram for pellet type and more than 8,000 yen for powder while the theoretical price level is around 2,600 yen based on current market price at London Metal Exchange.

An industry source said Japanese major automakers started to recognize the serious supply condition. A major automaker asked to Vale for special nickel supply to parts makers. Japanese buyers should diversify the nickel source to stabilize the procurement.