Nickel prices bounce back to record highs

LONDON: Nickel hovered near a record $29,950 a tonne on Thursday as available stocks held at about half a day of global consumption, but slowing economic growth may dampen the longer term outlook for metals.

“Nickel is tight, but stocks are holding. Medium term, there is potential for more on the upside in copper, nickel and zinc,” BaseMetals.com analyst William Adams said.

But the risk of slowing economic growth, particularly in the US, meant the longer-term outlook was less bright. “We will see firm demand from Asia, but I am concerned about a slowdown in the US,” Adams said, adding “The impact of higher rates and a weaker housing market may take time to feed into metals, but if the US consumer slows there will be a knock-on effect for China and other Asian manufacturers.”

New orders for US-made durable goods fell by 2.4% in July, which was much more than expected, as civilian aircraft and car orders tumbled, a government report showed. On Wednesday the National Association of Realtors reported US July existing homes sales fell to their lowest since January ’04. “The housing market doesn’t seem to be cooling; it actually seems to be getting frigid,” said Michael Metz, chief investment strategist at Oppenheimer & Co in New York.

Nickel gained $975 or 3.4% to $29,675/29,700 at midday, but volumes were limited at 155 lots as investors steered clear of a market crippled by low stocks. LME-monitored warehouse stocks fell 240 tonnes to 6,426 tonnes, of which only 1,716 were available to the market to support global consumption of 3,600 tonnes a day.

“I am amazed that the price is this high, but the supply situation probably justifies it,” a London-based dealer said.
Meanwhile, copper was up $50 at $7,660 and aluminium rose $14 to $2,497. Traders said investors would track events at BHP Billiton’s giant Escondida copper mine in Chile, where a 2-1/2-week strike has cut production by half at the operation, which produces 8% of the world’s copper.

“This isn’t a bad thing for BHP Billiton. They have a lot of other producing mines and their shares are going up on the back of stronger copper prices,” the dealer said. “A settlement will have a kneejerk reaction and prices will drop, but speculators may use a sell-off to pick up a few bargains as later this year there are more pay talks that cover about 20% of the world’s production,” he said.

Luis Troncoso, president of the 2,052-member union at Escondida, said: “We are back at step one. At this time there are no talks with the company...because they said they’ve given all they are going to give, so the dialogue was shut off immediately.”

Zinc was at $3,395/3,415, up $51. Zinifex, the world’s second-largest zinc producer, on Thursday forecast a strong year ahead on further growth in metals prices as global demand for industrial raw materials, led by China, outran supply.