As goes stainless steel demand, so goes nickel demand. I’ve been looking for a dip to buy back my longtime hold CVRD (NYSE:RIO) - the massive nickel mining giant from Brazil. After nickel bounced off its lows a couple of months ago, analysts and purchasing managers were looking for a rebound in demand in the 1st quarter of 2008 going into construction season.
However, stainless steel demand is still much lower than where analysts had expected it…about a month or more behind schedule. As such, I’m too weary to rebuild my position in CVRD. These mining stocks have had a massive run, and lately it’s been only on the dollar’s weakness (because as I’ve said, metal prices have stabilized). So if the dollar somehow stops dropping or even rebounds, this doesn’t look good. I’ll keep monitoring CVRD for a better entry point. Here’s the excerpt of the stainless steel article from Purchasing.com:
Stainless demand has not yet returned, according to market reviews by several analysts who had expected purchasing and pricing to rebound this month or next. Lower nickel prices since the peak in May “haven’t yet enticed stainless steel buyers back into the market as quickly as had been anticipated,” admits analyst Mike Gambardella at J.P. Morgan Securities in New York.
full article here: Stainless buyers’ strike is longer than expected