Based on record high nickel prices on the London Metals Exchange during December, the British global metals tracking firm MEPS predicts the price of stainless steel products to continue an upward surge into the second quarter of 2007.

“March should be the highest month,” according to a MEPS online analysis. “In the longer term, we expect stainless selling values to decline as nickel prices reduce and the U.S. economic slowdown begins to take its toll on stainless consumption in the U.S.,” the analysis continued.

The report noted that a declining U.S. dollar has caused the price of nickel, which is traded in dollars, to increase further than anticipated in MEPS previous forecast. Also, new nickel projects due to come on stream in 2007 have been delayed until 2008.

In related news, MEPS Stainless Steel Review reported that the world’s stainless steel sector achieved an unprecedented jump in crude production during 2006 to 27.8 million tons of total output, growing 14% from the previous year.

“Such a rate of increase is unsustainable,” said MEPS. “The long-term growth in production has been around 5% per annum. A significant increase was expected after the decline in 2005, but not a double-digit percentage gain.”

U.S. stainless production increased last year to an estimated 2.55 million tons from 2.2 million tons a year earlier. New capacity pushed the growth to above 15%.

The biggest increase was in Asia, however, with China becoming the world’s largest stainless producer at over 5 million tons during 2006.