LONDON (Commodity Online): BNP Paribas S.A. (Euronext: BNP) likely to expected a huge nickel surplus of 40,000 metric tons (mt) in this year.

According to Stephen Briggs, senior metals strategist, “ample inventories should continue to trend higher in the second half and that reported inventory stocks understate the true position since unreported inventory likely accumulated in 2011 in China and Russia.”

“We forecast a closer market balance in 2013, but this is as much because we assume appreciable producer cutbacks as because demand growth should pick up,” they added.

The Paris based bank continued that, “Nickel will remain in structural surplus at least through 2013 unless Indonesian policy leads to a sharp decline in the availability of ore for smelting elsewhere in Asia.”

With the market in surplus, the upside for prices should be limited. Still, nickel is not yet in such bad shape that it will be left out in the cold entirely if, as we expect, copper rallies in the second half of 2012. Equally, the downside may be limited, given that the nickel price is now deep in the cost curve, the bank added.

BNP also added that nickel may recover some lost ground towards $19,000 a metric ton in late 2012 on the back of a copper rally, but will be less well placed than most other metals to withstand a downturn in the copper price as 2013 unfolds.

Banque Nationale de Paris Paribas (BNP Paribas) was the world’s biggest bank, as measured by total assets of $2.670 trillion in 2011 and Eurozone's largest bank by deposits.