London: Nickel fell over 2% on the London Metal Exchange (LME) on Wednesday, 23 May 2007, following another rise in inventories to a five-month high, dragging other metals lower.
Analysts said the ongoing dollar strength weighed on prices, while the previous day’s failed rally in copper damaged sentiment and triggered losses of 3% in Shanghai copper futures. Nickel for delivery in three months fell to $46,900 a tonne, its lowest in under a month and was last at $47,200/400, down $1,000.
“Nickel is setting the emotional tone in the market at the moment,” said Jon Bergtheil, metals analyst at JP Morgan. “There are two factors conspiring against metals today: this specific situation in nickel and the dollar is again stronger so that doesn’t help.”
Stocks of nickel in LME warehouses rose to 6,834 tonnes, their highest since 21 December 2006 and over double from early February. Prices have hit successive peaks over the past two months, the most recent in early May at $51,800, as suppliers struggled to keep up with robust demand.
Piling up: A file photo of a bucket wheel reclaimer digging the earth at Eramet SA’s ferronickel plant in Noumea, New Caledonia, in the US.
Despite the latest fall, nickel prices are still up 42% since the start of the year. World stainless steel output was forecast to rise 5.1% to a record high of 29.8 million tonnes in 2007, the International Stainless Steel Forum said earlier this week. That compares with growth of over 16% in 2006.
In industry news, the world’s largest nickel producer Norilsk Nickel increased its bid for Canada’s Lionore Mining International Ltd, raising the stakes in its battle with Xstrata Plc.
Norilsk mines a fifth of the world’s nickel and more than half of its palladium, a precious metal used in jewellery and car exhausts. It would become the world’s first 300,000-tonne-plus producer should it acquire Lionore.
Copper prices were hit by nickel’s weakness. Prices fell very close to the psychological $7,000 level last week before recovering. “Sentiment is a bit nervous,” a trader said. A glut of metal in key consumer China caused concern.
“The fundamental tightness in the base metals markets is slowly easing over time, there is more supply coming. But we’ve still got good demand,” Bergtheil said.“The only thing that rescues the metals from decelerating in an orderly decline is periods of dollar weakness. If the dollar doesn’t help any longer, we are going to see the pressure of that.”
The dollar hit a three-month high against the yen and held near this week’s six-week high versus the euro, supported by receding expectations that the Federal Reserve will cut interest rates later in the year.
Other metals including lead, zinc, tin, and aluminium weakened.