Given inflation, a penny for your thoughts has probably become a nickel by now. And nickel is certainly foremost in my thoughts when looking at Inco
Unlike what we saw from copper giant Phelps Dodge
Inco took a one-two punch from lower nickel deliveries (down 8%) and lower realized selling prices (down 10%) that better results in copper couldn't fully counterbalance. Ultimately, that translated into diluted operating earnings per share, down 37% from last year's level.
So what's on tap for next year? In contrast to this quarter, where production was down about 3%, production should increase substantially next year in both nickel and copper. The key, of course, is what happens with pricing. Analysts seem to expect nickel and copper prices to fall this year, but those estimates are especially tricky and error-prone. Uncertainty regarding China's steel production and overall industrial growth makes it tough to say how the ultimate worldwide inventory and supply picture will look.
All the same, I'm at least mildly bullish on steel for the next year, and on aerospace for the next couple of years, and those are traditionally big customers for nickel. Furthermore, Inco's plans to boost production (as well as the ongoing acquisition of Falconbridge) should help at least partially mitigate pricing weakness up to a point. But the key, as always, will be containing costs and focusing on the long term.
As I've said before, Inco is an interesting stock if you have really firm opinions on nickel. If not, you might find that diversified mineral/metal producers such as BHP Billiton
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
