Weak Stainless Steel Demand Makes CVRD Dicey

Weak Stainless Steel Demand Makes CVRD Dicey

As goes stainless steel demand, so goes nickel demand.I’ve been looking for a dip to buy backmy longtime hold CVRD (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:

<blockquote class="quote">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.</blockquote>

full article here: Stainless buyers’ strike is longer than expected