(Repeats June 5 column with no changes. The opinions expressed here are those of the author, a columnist for Reuters.)
By Andy Home
LONDON, June 5 (Reuters) - Nickel touched a near one-year low of $8,700 per tonne on the London Metal Exchange (LME) last week.
It has recovered a little to $8,900 this morning but that still makes it by some margin the worst performer among the major LME-traded industrial metals with a year-to-date decline of over 10 percent.
And, if you believe Goldman Sachs, the stainless steel ingredient is going to stay at these bombed-out levels for a good while.
The Wall Street heavyweight has just downgraded its three-month, six-month and 12-month price forecasts to $9,000-per tonne from $12,500, $11,000 and $11,000 respectively.
"We now expect that nickel prices will remain trading at very low levels through 2017 and much of 2018 until a substantial supply response both in China and outside of China eradicates our forecast surplus of 37,000 tonnes in 2017 and circa 100,000 tonnes in 2018," according to Goldman ("Nickel: Low prices required", May 29, 2017).
This marks the collapse of nickel's previous bull narrative of mass mine closures in the Philippines.
As that scenario rapidly recedes, nickel is once again facing a long war of producer attrition to rebalance supply with demand.
Graphic on China's imports of nickel ore from the Philippines: tmsnrt.rs/2qX4A3D
As recently as March, LME three-month nickel was on a bull roll, trading above the $11,000 level.
The market's exuberance was down to one woman, Regina Lopez, eco-warrior turned environmental minister in the Philippines.
She put just about every single nickel miner in the country on notice of closure, threatening the removal of around eight percent of global supply and a termination of the flow of ore to China's giant nickel pig iron (NPI) sector.
And then at the start of last month she was gone, having failed to win endorsement from the government's Commission on Appointments.
Some smaller mines remain suspended. But most look set to continue operating with Lopez' replacement, former military chief Roy Cimatu, immediately adopting a more conciliatory stance.
Philippines nickel production fell hard, by 36 percent in the first quarter of this year, according to the International Nickel Study Group (INSG).
But that was as much down to a particularly heavy monsoon season as to environmental closures.
Similarly with shipments of nickel ore to China.
After slumping by 20 percent to 2.3 million tonnes in the first quarter of this year, China's imports from the Philippines jumped to 1.69 million tonnes in April. The year-to-date figure is now down by a much more modest 4 percent on last year.
This collective stay of execution for Philippine's nickel mines has seen nickel's supply-side story implode.
Compounding bulls' misery is the near simultaneous resumption of nickel ore flows from Indonesia.
It was Indonesia's ban on the export of unprocessed ores at the start of 2014 that caused Philippine nickel supply to surge in compensation.
A part political U-turn of that policy will see significant stocks shipped out of the country.
The combination of continued ore supply from the Philippines and a partial resumption of supply from Indonesia means the immediate raw materials pressure is off China's NPI producers.
Goldman now expects China's NPI output to rise 1.6 percent to 380,000 this year. It had previously forecast national output of 320,000 tonnes.
Not that China's NPI producers won't be feeling the pinch at these low prices. So will just about every other nickel producer.
Goldman's new forecasts are predicated on the price staying low enough for long enough to force supply out of the market.
Cost-curve economics will replace Philippine environmental policy as the driver of supply rationalisation.
The only thing is that nickel has been here before, most recently during the extended price trough that ran from late 2015 to the middle of 2016, when Lopez first grabbed the headlines.
And it turned out to be much more price inelastic than expected.
Some higher-cost operations did indeed exit the market, particularly in Australia and Brazil.
Some, such as the Falcondo ferronickel plant in the Dominican Republic, exited but have since returned under new ownership.
And others have all the while been ramping up production.
Vale's Goro plant in New Caledonia saw its best operational performance in the first quarter of this year since the facility, a by-word for technical problems, was first fired up in 2011.
Glencore's Koniambo ferronickel plant, another much-troubled mega-project also in New Caledonia, did the same.
Both are still running significantly below nameplate capacity, meaning that Vale and Glencore have every incentive to continue raising production.
It's instructive to compare the trends in mined and refined output over the last three years.
The INSG estimates that global mined production fell by almost 23 percent over the 2014-2016 period, largely reflecting a slump in Indonesian output after its export ban.
However, production of refined metal, including ferronickel, actually rose by 1.4 percent over the same period.
None of which bodes particularly well for a return of bullish exuberance to this market any time soon.
The underlying issue remains the same now as it was back in 2015-2016, the last time the London price traded consistently below the $10,000-per tonne level.
This is a supply chain that is still living with the consequences of nickel's extraordinary bull run to over $50,000 in 2006 and 2007.
It didn't stay there long but that price explosion caused the creation of a whole new supply stream. China's nickel pig iron production was a direct reaction to super-high refined metal prices.
The rest of the world's producers have been wishing it away ever since.
First Indonesia with its export ban and then the Philippines with Ms Lopez offered the tantalizing potential of NPI output collapsing due to want of feed.
But it has not happened and it looks an increasingly remote prospect.
Which means nickel producers are back to square one, a last-man-standing fight for survival. On previous form, it's going to be a long battle.
Editing by Susan Thomas