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UPDATE 1-Global nickel market seen in third year of deficit in 2018 -INSG

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MELBOURNE Oct 25 (Reuters) - Global demand for nickel is expected to outstrip supply for a third year running in 2018, as demand from the stainless steel industry expands and production of nickel-containing batteries grows, the International Nickel Study Group said on Tuesday.

Global demand for nickel is seen increasing to 2.259 million tonnes, compared with supply at 2.206 million tonnes, it said in its latest annual forecast, resulting in a deficit for refined nickel of 53,000 tonnes next year.

The projected deficit will be narrower than this year, which the INSG pegs at around 98,000 tonnes, with demand at 2.15 million tonnes and supply seen at 2.052 million tonnes.

Nickel use by the stainless steel sector grew 5 percent in the first half of 2017 when world stainless steel melting production reached 23.2 million tonnes, according to the International Stainless Steel Forum (ISSF).

INSG expects use from the sector to moderate in the second half of this year.

"(Next year) should also be a positive year for stainless steel but with lower projected growth. Increasing production of nickel-containing batteries will have a positive effect on nickel usage as well," it said.

Electric vehicle batteries are emerging as a new market for demand for the metal.

Refined Refined market balance

demand supply

2016 2.037 1.991 -0.046

2017 2.15 2.052 -0.098

2018 2.259 2.206 -0.053 (Reporting by Melanie Burton in Melbourne; Additional reporting by Nithin Prasad in Bengaluru; Editing by James Dalgleish and Peter Cooney)

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