On LME, nickel is plunging to new lows everyday as the consumers including the stainless steel industry have been opting for large scale production cuts. Unable to sustain, manufacturers and miners are resorting to production cuts all over the world.

The metal witnessed a brief rise on the strength of major production cuts in Australia, Japan and China before caving in. The three months nickel on LME has hit a low of $4000 a tonne last month, the lowest since 1987 on LME.World's largest nickel producer, Eramet of France and Chinese nickel major Jinchuan are taking steps to trim production. Eramet had slowed the output, which will be about 2000-3000 tonnes below the company's normal capacity. During mid-September nickel rose on mining cutbacksby Western Australian firm WMC and touched a high of $4310. WMC has cut output by 10,000 tonnes at its Kambalda mines.

When the Russian metal major Norilsk decided to cut production substantially, nickel responded by gaining around $30 on the LME in the second week of September. However, the joy did not last long as LME warehouses started overflowing.

The Norilsk news, following several other cutbacks or production slowdowns were just enough to save nickel temporarily from falling below the $4000 levels against a massive pile-up of stocks around the world. But dealers, waiting to know further details of Norilsk plans, said nickel was looking fundamentally flawed. The Russian firm, however, clarified that it was not changing its 1998 output plans and these would be around 1997 levels at 1,70,000 tonnes.

Canadian mine major Falconbridge has cut down its nickel operations in the Dominican Republic while Japanese major Sumitomo has cut its nickel and ferro-nickel production in 1988-89 by 10 percent.

Waning demand for stainless steel in Asia has been a major factor for nickel's fall. South Korean stainless steel industry, one of the major consumers in the world, has decided to cut the output further. Nickel demand by Korean industries is expected to fall by more than 6,000 tonnes, according to traders.

The situation could be worse for nickel producers as the lower cost production facilities in Australia are about to take off. The cheap laterite leaching operation method, coming on stream in Australia, threatens to take on the older suphide-based miners head on. If the new laterite process proves much more effective than the conventional method, some of the majors will have to adopt the new technology or shut the business altogether.Nickel, experts say, is unlikely to pick up in the immediate future. The free-fall, which began in July, had been accelerated of late. Only consumption by the re-chargeable battery industry has witnessed any improvement.

The world market is expected to show asurplus of 25000-30000 tonnes this year. Indian market has seen much more stable demand for nickel. Though the metal saw some fluctuation in late-August, it steadied towards the beginning of September.