NICKEL UPDATE

NICKEL UPDATE 21 AUGUST

Xstrata PLC said yesterday it has suspended its Falcondo

ferronickel operations in the Dominican Republic after costs

surged and metal prices plunged.

The suspension may last four months, said Zug, Switzerland-

based Xstrata.

The operations produce 29,000 tonnes of nickel a year, equal

to about 2 per cent of world primary nickel production.

Russia's Industrial Metallurgical also reduced output of the

metal by as much as 40 per cent. Nickel rose as much as 4.4

per cent in London.

"The resumption of activities will be assessed based on market

conditions, which are expected to improve towards the end

of 2008," Ian Pearce, chief executive officer of Xstrata's

nickel unit, said in a statement.

The cuts follow lost output this year from labour disputes

and disruptions in Australia and South America. Nickel

supply may match demand in 2008, instead of reaching

a surplus as previously expected, London-based metals

research company CRU said. There was a 96,000 tonne

surplus last year.

Falcondo produces ferronickel, a combination of iron and nickel

used by stainless-steel producers.

Moscow-based Industrial Metallurgical Holding, which produces

about 5 per cent of Russia's total output of the steel-making

ingredient, said present nickel prices make current production

volume unprofitable.

Its cuts are indefinite and the volume will be restored

when prices rise.