A nickel producer that hasn't made a nickel lately sees turnaround

Inco hasn't made a profit since 1980, but the noncommunist world's largest nickel producer says it will soon. Nickel prices, and to a lesser extent copper prices, determine Inco's profitability. Fifty percent of all nickel produced is used in stainless steel in industries such as petrochemicals and aerospace. The drop in capital spending in those businesses during the recent recession meant a drop in nickel consumption and massive losses for Inco.

In 1981 Inco lost $469.6 million; in 1982, $203.3 million; and in 1983, $234. 9 million. When it started to lose money in the third quarter of 1981, it was the company's first quarterly loss in almost 50 years.

The chairman and chief executive officer, Charles Baird, said recently the company has been making a trading or operating profit, which doesn't count overhead or interest costs, in the second quarter: ''If we have some reasonable price improvements we expect to be profitable at the bottom line in the third quarter.''

Higher corporate capital spending during the rest of 1984 might bring about a rise in metal prices. One analyst estimates that by next spring nickel could be

During the time Inco has been losing money, it has managed to raise $205 million of equity capital, keeping the company from going further into debt. It is filing a new share issue now, one that won't be available in the United States. The money raised, probably $100 million, will be used to pay down part of its $400 million of floating-rate debt. Rising interest rates worry Inco: Every percentage rise costs the company an extra $4 million a year.

The new share issue is unusual in that it is a preferred that is convertible into nickel or copper, or really the cash equivalent of copper or nickel as measured on the London Metal Exchange.

While Inco has been in the red it has continued to pay a dividend, although the dividend was cut drastically in the third quarter of 1981 from 18 cents to 5 cents a quarter. The company wanted to keep paying dividends for a number of reasons, one of them being that institutions such as life insurance companies and pension funds in Canada cannot own shares in a company that does not have a steady record of paying dividends. Another reason, says Mr. Baird, is ''a reflection of the confidence that we would become profitable again.''

There has been a 24 percent reduction in nickel inventories on the London Metal Exchange since March (from 32,664 tons to 24,828 tons), and a lot of that is ''cathode'' nickel, which is mostly produced by the Soviet Union.

''The Russians will not certify that there is no Cuban nickel mixed in with their Russian cathode,'' Baird says. Buyers in Europe are reluctant to buy because they cannot guarantee that their stainless steel exports to the United States have no Cuban nickel in them. The US has an embargo on Cuban nickel.

Total world nickel inventories are now at about three months' demand. That, according to Baird, ''is about the lowest level industry can operate at.'' Stainless steel production was about 2 million tons worldwide in the first quarter. Inco hopes that will continue, although the company expects a drop in total nickel consumption in the third quarter of this year.

Inco has also suffered from a glut of nickel on world markets because of so-called ''social nickel'' - nickel produced from government-owned operations in Queensland, Australia, and New Caledonia. These governments do not care if they make a profit. Apart from Cuba and the Soviet Union, the nickel operation that bothers Inco most is the Marinduque Mining operation in the Philippines. Inco has protested that the Philippine government financed the nickel mining operation with money (almost $700 million, according to Inco) borrowed from development banks, funded by Western governments.

''This bailout is a direct subsidy on the part of the [Philippine] government ,'' says Baird. ''This subsidized nickel will be coming into the United States in competition with ours.'' When Inco ran an unprofitable operation in Guatemala , he says, it closed it down and took a loss.