News

February 06, 2007

Talk Of Nickel Substitution Can Be Dismissed

By Our Man In Oz

Substitution is a word used increasingly in debate about the nickel market, if only because some observers cannot accept that a price of US$18 a pound can last long. Popular as the theory is of nickel being replaced in the making of stainless steel by manganese and chrome, the truth is a different matter as China discovered last year when it opted for a lower grade stainless, called in the trade “nickel 200”. That material, which uses between two-and-four per cent nickel, is much cheaper than the next stainless steel grade, nickel 300, which uses between eight-and-10 per cent nickel. The problem, as China discovered to its annoyance, is that in certain applications, such as in air-conditioners, it rusts – which diminishes by a wide margin the concept of a steel being stainless.

Savvy investors will immediately spot the point of that Nickel 101 lecture and perhaps re-think any decision they are about to make such as selling shares in nickel miners because they believe the market has peaked. Essentially, the message is that “steels ain’t steels” and nickel has a guaranteed market because substitutes ain’t what they’re cracked up to be.

For long-term followers of the nickel market, including Minesite’s man in Oz, the Chinese air-conditioning scandal, which saw...