DJ China Nickel Pig Iron 08 Output 110,000 Tons,+30% On Yr-Report

SYDNEY, Mar 03, 2008 (Dow Jones Commodities News via Comtex) --

China's nickel pig iron industry will add 110,000 metric tons to the global nickel market this year, up some 30% from levels seen last year, Macquarie Tuesday said in a report.

Nickel containing pig iron emerged as a significant swing supplier in 2007, when London Metal Exchange nickel prices for three-month delivery hit a record $51,800/ton in May, and acted as an "emergency" source of supply, Macquarie said.

Major steel mills in China such as Tisco and Baosteel, and South Korea's Posco are sourcing almost 50% of their nickel feed from nickel pig iron to save costs in stainless steel production, the bank said.

Nickel contained in pig iron is priced at only 75% to 85% of the equivalent LME price.

Output rose from virtually nothing two years ago to 85,000 tons last year, or around 6% of total world nickel supply.

LME nickel prices had collapsed over the course of the second half of last year to trade at less than half their $51,800/ton peak, driven in part by nickel pig iron production.

However, production costs for nickel pig iron are rising as ore prices are linked to the LME nickel prices, which have rebounded somewhat and have surged to four-month highs of $34,050/ton recently.

Shortages of coking coal in China are also adding to production costs, rising from just below $15,000/ton in the second half of last year to above $20,000/ton this year, forcing the closure of some nickel pig iron plants.

-By Elisabeth Behrmann, Dow Jones Newswires; 61-2-8235-2965; elisabeth.behrmann@dowjones.com

(END) Dow Jones Newswires

03-03-08 2236ET