Nickel market faces shortfall, price spikes - analyst

CAPE TOWN Feb 4 (Reuters) - The price of nickel will find support at $25,000 a tonne and possibly rise to $40,000 a tonne in the next three years due to unexpected delays in production from new mines, a mining analyst said on Monday.

Nickel, a key product in the manufacture of stainless steel, is currently trading at about $27,000 a tonne.

"Looking out three years we are currently anticipating a well-supported price at $25,000 a tonne, with the potential for price spikes to $40,000 a tonne," Jessica Cross, CEO of Virtual Metals, told the Indaba Africa mining conference in Cape Town.

Cross said that strong demand from emerging economic superpower China had bolstered nickel demand.

The Asian giant's thirst for the base metal is not expected to significantly taper off anytime soon.

China's stainless steel production has soared, with the country now accounting for about a quarter of global output. Chinese nickel imports were up 8 percent in 2007 despite the impact of high prices for the metal.

Production start delays in a trio of new nickel projects in New Caledonia and Australia could add to the tightness in the nickel market, said Cross, who suggested that it was headed for a shortfall of 500,000 tonnes by 2012. (Reporting by Paul Simao, Cape Town bureau 27 82 312 4114)