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China's Jinchuan Sees Nickel Prices Retreating
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BEIJING, Mar. 8 -- China's Jinchuan Group expects lukewarm demand growth for nickel in China this year, with prices of the stainless steel ingredient falling back to average $18,000 a tonne in 2010, the firm's chairman told Reuters on Sunday.

"I don't think nickel demand is improving a lot," said Yang Zhiqiang said in an interview on the sidelines of China's annual parliament meeting. "The stainless steel sector is recovering, but is not back to the level before the financial crisis.

"We forecast this year's price is about $18,000 a tonne."

The London Metal Exchange's three-month nickel contract has traded in a range of about $16,000-$20,000 per tonne since the beginning of last August, but it pushed higher in the second half of February and prices held above $22,000 on Friday.

Prices have more than doubled since a year ago, when the financial crisis crippled demand, and Jinchuan itself last raised its prices last week.

Stainless steel producers in China and abroad have been passing price rises on to customers. South Korea's POSCO raised its February and March prices for the first time since September.

But many analysts are sceptical of the fundamental basis for the price recovery, citing huge stockpiles of the metal which could keep the market well-supplied, and warn of speculative investment pumping prices up.

China's nickel imports more than doubled last year to over 250,000 tonnes. In January, the last month for which figures are available, imports remained up more than 100 percent year-on-year but, at 16,219 tonnes, well below the 2009 monthly average.


Yang said the group aims at producing 130,000 tonnes of nickel and about 6,000 tonnes of cobalt in 2010, unchanged from last year. The group did not have plans to expand production capacity at the moment, Yang said.

Jinchuan has started trading cobalt futures on the London Metal Exchange, which were launched last month, but the company is only trading very small volumes, he said.

"Cobalt futures should have a bright future, as cobalt has attracted attention from more and more people," said Yang, "but it will also provide another opportunity to speculators."

China is the world's top producer of cobalt and Jinchuan's output accounted for almost a third of the 19,000 tonnes of the refined cobalt the country produced last year. Cobalt is used in aero engines and hybrid car batteries.

Yang said the group is considering listing a unit on the domestic A-share market.

"We are not working on an initial public offering of the group, but are considering listing a unit related to one product. We are trying to meet the basic requirements this year," Yang said, declining to give details of what business would be listed, or the time frame for the IPO.

Jinchuan is looking into opportunities to invest in nickel, copper, cobalt and precious metals resources overseas, after having invested in Africa, Australia and the United States.

"If possible, we are also looking at lead and zinc resources," said Yang. "In terms of location, so long as there are reliable resources, feasible technology, controllable risk and good profit prospects, we are interested.

"We would like to be the leading operator or controlling shareholder. Otherwise we would only invest in a pact led by giant mining firms such as BHP Billiton."

Jinchuan is also interested in copper and gold resources in Mongolia, Yang said.


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