PERTH (miningweekly.com) – The price outlook for nickel post-2014 was robust, as the metal crept back to an average of $8/lb, metals analyst Alto Capital reported on Thursday.

Speaking at the Paydirt Australian Nickel Conference, Alto senior analyst Carey Smith said that despite the expected increase in nickel prices, the sector would continue to face short-term challenges.

Smith expected Australia’s mid-cap nickel producers to outperform over the next 12 months as all had strong balance sheets that were cushioned against low price periods. He added that most could also take advantage of acquisition opportunities as they arose.

“All Australian mid-cap nickel producers are currently profitable at C1 levels, and the Australian nickel sector is doing better than many think,” Smith said.

“Globally, however, nickel has underperformed.

“Of the planned new production coming through, of 330 000 t of new capacity, most of the seven projects involved have faced large delays, of on an average, three to five years.”

He noted that instead of a time spread of new capacity, the majority of the new supply was now being bunched into the next six to twelve months.

“The culprits are commissioning problems and slower-than-planned ramp-ups. There is genuine potential for additional oversupply for calendar 2014 at least,” he warned.

“It is also highly unlikely that any of these new suppliers will be profitable at current nickel prices.”

The September quarter average price for nickel was $6.30/lb with an average of $7/lb over the past six months – a figure still lower than the quarterly average during the global financial crisis.

“The September figure was also the lowest quarterly average in Australian dollar terms in 10 years, and when you consider that the floor price is historically around 90% of C1 costs – or currently $7.8/lb - these new supplier mines are going to struggle at least in the short-term,” Smith said.

He also warned that current stockpile levels remained at an all time high of around 48 days consumption, and global demand remained insufficient to significantly reduce stockpile, at a time the new supply was starting to hit the market.

“However I expect nickel to recover and hit around $17 500/t in 2014.”