Nickel Market Outlook
Surpluses Set To Continue For The Nickel Market

Our outlook for the nickel market remains one of ongoing market surpluses
that are likely to result in continued growth in inventories barring a marked
resurgence in demand or a weaker-than-expected supply-side growth as
new mine supply come on-line.

Nickel prices have recently begun to come under pressure as the market
takes more notice of slowing demand and the current high inventory levels.
The recent pullback in prices leads us to believe the market has begun to
price the apparent oversupply, albeit slightly quicker than anticipated.

The outlook for nickel is set to be determined by the stainless steel
producers, however, demand remains lackluster and substitution of nickel
could limit restocking. From the supply side, the success of the new round
of laterite nickel projects will be the driver.

We have revised downward our 2008, 2009 and 2010 nickel price forecasts
to US$12.0/lb, US$10.0/lb and US$8.0/lb, respectively, and adjusted our
EPS and CFPS estimates and price targets for those companies with
exposure to nickel. Downgrading SKR to SP (from SO-S) as of 6/1.