BHP Billiton expects stainless steel demand to be robust over the long-term, underpinned by China's urbanisation and industrialisation.

The mining major made the comments in a presentation to analysts on a site tour at its nickel operations in Western Australia.

Nickel prices have plummeted from over $US30,000 a tonne on the London Metal Exchange at the start of the year, to a five-year low of under $US10,000 a tonne, squeezing higher-cost operations and resulting in the closure of a number of operations.

The fall in prices has already resulted in the closure of operations and deferral of projects totalling about 120,000 tonnes of production, in response to the squeeze on profit margins.

“Stainless steel and nickel growth continues to look promising in the long term due to the emerging market effect,” BHP said in the presentation.

Substitution of high-grade stainless steel with lower grades or other materials altogether, such as plastic, will slow, BHP said, with “easier” substitution already achieved.

BHP’s latest large-scale nickel project, the laterite Ravensthorpe mine in Western Australia, is not cash positive, analysts say, given the fall in prices and rise in input costs, foremost sulphuric acid. – The Australian