Was there a Nickel Shakeout?

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Notes

1. It is typical for mineral commodity analysts to consider periods of up to five years as the short run and those exceeding five years as the long run.This period may vary, however, for different metals.

2. Tilton (2006) provides an interesting recent discussion of the forces at play in metal markets during the short run and the long run.

3. Inco also had plans to develop the Goro project in New Caledonia soon after 2000.

4. During 2006 the average monthly spot price of nickel on the London Metal Exchange was close to $US 24,000 per tonne. This was almost four times its level of around $US 6,000 per tonne in 1999.

5. These estimates are derived from Mines Branch (1953).

6. See McCutcheon (2003) and Richmond et al. (2005) for estimates of old scrap use. Notably their recycling estimates are considerably higher than those used in Maxwell (1999) and these more recent estimates have been used in the analysis in this paper. Estimates of recycled nickel use before the mid‐1990s are generally unavailable.

7. Because of considerable volatility in consumption of nickel estimates from one year to the next, these calculations have based reference year calculations on three‐year moving averages.

8. This is based on a notional estimate that recycled nickel in 1960 was 100,000 tonnes. If one assumes a lower rate of recycling in 1960 the average annual rate of growth of total nickel consumption between 1960 and 2005 rises significantly. If it were 50,000 tonnes in 1960, say, the rate would rise to 4.2 per cent. This may be a more realistic estimate since most nickel recycling comes from stainless steel that has reached the end of its useful life. Stainless steel use in the immediate post‐World War II period was a much smaller percentage of total nickel use (say 25 per cent) than it is today (around 70 per cent).

9. The source of nickel consumption data is ABARE (2005) and of world GDP it is World Bank (various years) and Maddison (2006)

10. Following Tilton (1985, p393), “a main product is so important to the economic viability of a mine that its price alone determines a mine's output…a by‐product …. so unimportant, its price has no influence on mine output” and “when prices of two or more (minerals) affect output, the (minerals) are co‐products.”

11. With such an approach there will be debate about when a by‐product becomes a co‐product.

12. These shares of mining and refining activity were controlled by Billiton, which did not merge with BHP until 2001.

13. From Humphreys (2006)

14. It is interesting to note that these conclusions differ from those of Humphreys (2006).

15. These estimates appear on the Inco website, accessed in mid‐Januaty, 2007.

16. In the mid‐ and late‐1990s the authors of the ‘Nickel Outlook’ papers for the Australian Bureau of Agricultural and Resource Economics (ABARE) consistently reported the expected commissioning of several new projects which have either not proceeded (e.g. Yakabindie, Honeymoon Well, Marlborough) or whose start was delayed by long periods (e.g. Maggie Hays).

17. See Table 4 of Maxwell (1999, p7).