Nickel and copper battered by dip in ChineseNickel and copper battered by dip in Chinese demand
Reuters
June 12, 2007 at 7:52 AM EDT
LONDON — Nickel dropped by more than 6 per cent on Tuesday and copper shed more than 1 per cent as Chinese imports fell in May, analysts said.
Nickel for delivery in three months on the London Metal Exchange (LME) fell by 6.4 per cent to hit $39,800 a tonne by 11:21 a.m. GMT, its lowest since February 23.
“Nickel inventories are up again and cancelled warrants are down, removing some price support,” analyst Michael Widmer at Calyon said.
Nickel stocks rose by 42 tonnes to 8,922, with over two days of global consumption or 8,478 tonnes available to the market.
Three-months copper was down $185 or 2.6 per cent at $7,170/7,190, after rising 3 per cent in the previous session.
“There is downward pressure on copper emanating from Chinese import figures, while upward pressure comes from possible strikes at Collahuasi and Grupo Mexico,” Mr. Widmer said.
China imported 220,561 tonnes of copper, including semi-finished products, in May, down about a quarter from the high levels seen in March and April.
In Chile, workers at Collahuasi, which can produce around 400,000 tonnes of copper a year, said they planned demonstrations later this week to demand an improved labour contract proposal from mine managers. In Mexico, workers at the country's largest copper mine have backed a strike call by their union, bringing a threatened stoppage one step closer at nine Grupo Mexico operations later this week.
The union official, who asked not to be named, said the strike at the Cananea copper mine and eight other facilities would begin at midday on Friday if no deal was reached with Grupo Mexico.
The past week saw a significant sell-off in base metals on the re-rating of interest rate risk as bond markets have had to price in a stronger-than-expected U.S. economic data and a greater degree of inflation risk.
Higher interest rates could dampen economic growth and lower commodity demand prospects, analysts said.
Barclays Capital said commodity markets should now be pricing in stronger, rather than weaker U.S. demand prospects.
“Of course, there is the risk that rising inflationary pressure leads to Fed over-tightening, though that prospect seems a long way off,” Barclays Capital said in a report.
Goldman Sachs said the near- and medium-term outlook for commodity demand had, if anything, improved. As a result the bank maintained its 6.4 per cent return forecast for commodities.
Aluminum was at $2,700/2,705 against $2,724.
“Aluminum prices are likely at risk of a correction in the near term,” Goldman Sachs said in the report.
Lead was softer at $2,320/2,340 against the last quote on Monday at $2,345/2,350 when it jumped 3.3 per cent.
LME stocks have fallen by nearly 10 per cent during the last month to 44,175 tonnes.
The pay dispute at Lundin Mining's continued with one trade union refusing to work overtime..
Zinc was down at $3,640/3,660 versus $3,745/3,750 in the previous session. Tin was lower at $13,850/13,050 from $13,975/14,000.