With the price of nickel down around 7 percent and year-end stocks in LME warehouses at their highest levels since May, investors in the base metal were hard-pressed to find good news in 2012. However, price-positive developments could be around the corner, according to analysts, who predict that the surplus of mined nickel forecast to come onto the market from China and elsewhere is overblown. A recent report from Citi Research states that "fundamentally misunderstood" nickel suffers from a "reputational deficit amongst many in the analytical community" because of assumptions made about its oversupply. These assumptions include the fact that every year for the past five years, a "wave of supply" has been due to hit the nickel market — however, that wave has failed to materialize, mostly as a result of failed production estimates. Underperforming nickel assets in 2012, notes Citi, include Vale's (NYSE:VALE) 53,000-tonne-per-annum (tpa) Onca Puma ferronickel operation, which needs a complete furnace rebuild and is unlikely to restart until mid-2013; Anglo American's (LSE:AAL) 40,000-tpa Barro Alto ferronickel operation, which suffered a kiln sidewall collapse in October; and up to 50 percent of Chinese nickel pig iron production reportedly being shuttered due to low nickel prices. In addition, Russian miner Mechel (NYSE:MTL) said just before Christmas that it will be closing its South Urals nickel plant due to a "slowdown in demand for the metal and what the company regarded as a 'bleak' outlook for price recovery in the near future," reported The Australian. As a result of this "supply failure," as well as other factors, including low stainless steel inventories in Europe and China (nickel is a key ingredient of stainless steel), Citi expects nickel to rally to $21,000/tonne in the first quarter of this year — a 19-percent increase over the current LME price of $17,540/tonne. The research group expects nickel to average $21,770/tonne in 2013 and rise to $24,400/tonne in 2014.