Nickel Advances in London on Falling Stockpiles, Supply Delays
By Brett Foley and Chanyaporn Chanjaroen
Jan. 15 (Bloomberg) -- Nickel rose on the London Metal Exchange on speculation dwindling stockpiles and supply disruptions will create a shortage of the metal.
Inventories tracked by the LME fell by 240 tons to 5,676 tons, the exchange said in a daily report today. LME-monitored stockpiles have slid 82 percent in the past 12 months while delays to nickel projects proposed by BHP Billiton Ltd. and Cia. Vale do Rio Doce, the world's largest and second-largest mining companies respectively, have exacerbated shortages.
``Those supply concerns will remain this year and into 2008,'' said Roy Carson, a London-based analyst at Triland Metals Ltd, one of 11 companies authorized to trade on the LME's floor. ``How much that continues to affect the price will depend on demand.''
Nickel for delivery in three months on the LME increased $1,255, or 3.9 percent, to $33,700 a metric ton as of 11:59 a.m. in London. The metal dropped 3.2 percent at the end of last week. Nickel, which is used in stainless steel, more than doubled last year and traded at a record $34,950 on Dec. 15.
BHP said on Nov. 30 that its Ravensthorpe project in Australia would be delayed by as much as a year as costs increased 64 percent. Vale was ordered by a French court on Nov. 24 to stop construction at its $2.15 billion Goro mine on the Pacific island of New Caledonia until it received administrative licenses. Vale acquired Goro when it gained control of Canadian miner Inco Ltd. last year.
Further exacerbating supply concerns, Eramet SA, operator of the world's largest ferronickel plant, said on Jan. 11 that it reduced sales to customers and used inventories to cope with a three-month-old strike that has cut production by almost a third. The protest on the French-controlled Pacific island of New Caledonia has reduced Eramet's production by 50 metric tons a day, or 27 percent of its 185-ton daily rate, since Sept. 25.
Nickel Demand
Deutsche Bank AG, Europe's biggest securities firm, raised its 2007 price forecasts for nickel by 62 percent to $14.28 a pound, and its 2008 forecast by 110 percent to $14.06. Spot nickel prices averaged $10.96 a pound in London last year. The bank also increased its 2007 zinc forecast by 6.7 percent to $1.67 a pound.
Rising demand from Chinese stainless-steel makers and delays to the nickel projects of Vale and BHP means there will be a nickel deficit until 2009, the bank said in a Jan. 12 report.
Stainless-steel output rose 14 percent last year to 27.8 million tons, industry consultant MEPS (International) Ltd. said on Dec. 21.
``Demand seems to be holding up at the moment,'' Triland's Carson said.
Aluminum Shortage
Copper fell $50 on the LME to $5,700 a ton. LME-tracked inventories of the metal gained for a fourth day, up 2,600 tons, or 1.3 percent, to 199,450 tons. Aluminum gained $33 to $2,728 and zinc increased $50 to $3,820.
LME data show a shortage of aluminum, the most-traded metal on the exchange, as cash prices were $110 more than the three- month price today, the highest premium since August 1997.
A group of investors hold long positions, or bets that prices will rise, exceeding 40 percent of total open interest for the contracts to expire this month, LME data as of Jan. 11 show. Open interest means the total of bets on price direction.
There were two short positions, or investors previously sold the futures on expectation of buying them back at lower prices, of up to 19 percent each of total open interest. These short holders need to buy the futures to cover the positions this month, boosting prices of metal for immediate delivery.
Rising demand for aluminum this month probably came after China, the world's largest producer and consumer of the metal, increased export tax and cut incentives for exports last year, Randy North, a trader at RBC Capital Markes in London said today by phone.
Such measures are now reducing supplies from China. ``The market underestimated the impact of China's rebate cut,'' he said.
