UBS Indonesia Nickel Additional surplus warnings; re-iterate Sell

INSG warns of continuously weak 2009
The global nickel market will exhibit an 80k tonnes surplus in 2009 as falling demand continues to outpace supply cuts, according to the International Nickel Study Group (INSG). This surplus is 207% higher from 2008’s 26k tonnes, by our estimates, and 300% above our UBS forecast of 20k tonnes for 2009.

No near-term recovery in primary nickel demand
The INSG furthermore highlights that while the economic crises has created a large degree of supply and demand uncertainty, it remains unlikely that any substantial improvement will take place in the nickel market this year.

Bearish sentiment supports our view
As we move into the seasonal slow industrial growth period of May-July, we highlight that nickel prices could fall further from last week’s -10% YoY. As such, we re-iterate our Sell on Indonesian nickel stocks, Antam and Inco Indonesia, who we believe are overvalued at 17.2x and 33.3x PE 09 respectively.