China helping nickel: analyst – by Carol Mulligan (Sudbury Star – September 18, 2012)

The Sudbury Star is the City of Greater Sudbury’s daily newspaper.

Three key drivers will boost commodity prices in the second half of 2013 — China, China and China — says an economist with TD Securities. China consumes about 40% of the world’s nickel and copper, and its economy is “not c o l l a p s i n g ,” despite some naysayers, says Bart Melek.
China has $3.6 trillion in reserve, a minimum debt to gross domestic product ratio and a “big political incentive” to keep growing, Melek told about 100 people at a breakfast meeting Monday of the Sudbury Area Mining Supply and Service Association.
Stability is important in the one-party state, whose government is determined to keep people employed and food on the table, said Melek. China has also embarked upon a five-year plan to move 20 to 25 million of its citizens every year from rural areas to cities. That requires more housing and transportation services that require copper, nickel and iron ore.
China’s economy may be growing more slowly than it was, but it’s still growing three to four times as fast as our economy, said Melek, head of commodity strategies at TD Securities. Melek is forecasting economic stability in the United States as well, because of a monetary policy to hold interest rates at 0% to 2015.
He is forecasting a 3% growth in the economy globally this year and 4% next year.
There are growth forecasts of 7 to 8% in China in the next seven to eight years.
“Anything over 3% is a good news story for commodities,” he said.
People get excited when the economy in the United States grows by 3%, when countries such as China and India are essentially “building an America every year.”
When it comes to base metals, there should be less of a “boom or bust” type of environment. However companies are having to go deeper for poorer bodies of ore, said Melek, adding about a dollar a pound to production costs because of capital expenditures.
Nickel is the base metal of most interest in Sudbury, and Melek is forecasting it will increase to $8.75 a pound by the second half of 2013 — as high as $9 a pound on ìntraday trading.

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