NICKEL-Major market developments in April

LONDON May 14 (Reuters) - Rising supply, high stocks and lower than expected consumption from the key stainless steel industry point to weaker nickel prices in the coming months, analysts say.

"The next major move for prices will probably be on the downside. Production will inevitably swamp demand," said independent consultant Angus MacMillan.

The London Metal Exchange (LME) three-months nickel price was last indicated at $26,400/600 a tonne.

Demand from stainless steel producers has fallen short of expectations so far in the seasonally stronger second quarter and fears are growing for impending weakness in the Asian market.

"...The market is likely to remain over-supplied for the time being unless there is an acceleration in growth in the stainless sector," Standard Chartered said in its latest report.

"The recent softness in Asia suggests that the worst is not yet over," it added.

Standard Chartered predicts three-month nickel prices will average $27,900 a tonne in the second quarter of the year, falling to $24,000 in the third quarter and to $22,000 in the final quarter.

Another analyst said the market would be more or less balanced for the year as a whole. While he did not expect prices to go higher, he thought they would hold up reasonably well.

Beyond that he said much would depend on how new projects starting up towards the end of the year fared and their impact on nickel production.

Below are detailed some of the more significant recent developments in production, stocks and prices that may influence the direction of the market in 2008.

PRODUCTION:

April 25 - Brazil's Vale (VALE5.SA) (RIO.N) said rising costs and the impact from gains in the local currency made it lift the total investment estimate in the Onca Puma nickel project by about 60 percent to $2.3 billion. The project, with a planned 58,000 tonnes annual ferro-nickel capacity, is scheduled to start up in the first half of 2009.

April 10 - Zambia's Munali nickel mine will produce its first concentrate this month and plans to raise annual output by 20 percent to about 10,500 tonnes at full production in 2009, mine owner Albidon Ltd (ALB.AX) said.

April 8 - Russia's Norilsk Nickel (GMKN.MM) (NKELyq.L) said it plans to increase the capacity of its Harjavalta refinery in Finland to 66,000 tpy in 2009, a senior Norilsk official said.

April 8 - Japan's Sumitomo Metal Mining Co Ltd (5713.T) said it plans to produce 17,900 tonnes of electrolytic nickel in the six months to end-September, compared with 14,763 tonnes a year earlier and 16,000 tonnes in the previous six months. The company also plans to produce 11,500 tonnes during the period, up from 10,613 tonnes a year earlier and unchanged from the previous six months.

April 1 - BHP Billiton Ltd's (BLT.L)(BHP.AX) Cerro Matoso nickel mine in Colombia could need about a month or more before returning to full production following a month-long strike, the company said. The operation produced almost 50,000 tonnes of nickel in ferro-nickel in 2007.

PRICES

Nickel prices held relatively steady in April, ending the month at $28,700 a tonne compared with $29,800 at the end of March.

A move above $30,000 up to $30,300 mid-month, helped by optimism about stronger demand, proved short lived as worries about increasing supply gained the upper hand.

The market has since eased further in early May on global demand fears, with traders citing a lack of demand from stainless steel producers.

In January, the twice-yearly Reuteres base metals price poll of 29 analysts [MET/POLL] put the median average for the LME cash nickel price MNI0 at $28,660 a tonne in 2008 and $25,000 in 2009. In 2007, the price averaged over $36,000.

STOCKS

LME nickel stocks rose slightly in April, ending the month at 51,432 tonnes, compared with 50,370 tonnes at the end of March. Inventories are around their highest levels in eight years. In February 2007 they were around their lowest since 1991.

(3000 Xtra users can access Reuters Metal Production Database (MPD) by clicking on mpd.session.rservices.com. MPD details historical and predicted output and capacity for bauxite, copper, lead, zinc and gold mines, alumina refineries, aluminium, copper, lead and nickel smelters and copper, zinc, lead and nickel refineries between 1997 and 2011.)