Nickel Heads for Biggest Weekly Gain in More Than Two Years
By Chanyaporn Chanjaroen and Brett Foley
March 16 (Bloomberg) -- Nickel headed for its biggest weekly gain in two-and-a-half years in London, as investment funds bought the stainless-steel ingredient on speculation shrinking stockpiles indicate supply is falling short of demand.
Inventories tracked by the London Metal Exchange dropped 0.8 percent to 3,564 metric tons, the exchange said today in a daily report. Stockpiles have declined 89 percent in the past 12 months and are equal to less than one day of global consumption.
Funds speculating in nickel are ``the major cause'' of the price surge, Eero Mustala, a spokesman for Outokumpu Oyj, the world's third-largest stainless-steel producer, said today by telephone from Espoo, Finland. About two-thirds of nickel supplies are used to produce the alloy.
Nickel for delivery in three months on the LME rose $650, or 1.4 percent, to $47,750 a ton as of 5:19 p.m. in London. The contract has gained almost 13 percent this week, the largest advance since the week ended Sept. 24, 2004. The metal earlier today reached a record $48,500.
A 43 percent gain in prices this year may encourage some steelmakers to use their existing stocks of the metal rather than buy more supplies, said analysts including Michael Widmer at Calyon in London.
OAO GMK Norilsk Nickel, BHP Billiton Ltd. and other mining companies have failed to expand output fast enough to keep up with demand from steelmakers in nations such as China, the world's fastest-growing major economy.
Nickel demand will outpace supply by 13,000 tons this year, Canaccord Adams analysts Orest Wowkodaw and Gary Lampard in Toronto said in a March 13 report.
Economic Expansion
Among other metals on the LME, copper advanced taking this week's gain to 7.9 percent.
China, the world's biggest copper user, produced less of the metal used in pipes and wires in the first two months of this year as smelters faced shortages of raw materials and imports surged, the National Bureau of Statistics said today.
BHP, the world's biggest miner, said in December that copper concentrates will be in deficit in 2007 and 2008 as smelting capacity exceeds mine supply growth. Copper increased $75, or 1.2 percent, to $6,615 a ton.
Copper may rise again next week on speculation that a pick up expanding industrial production in China in coming months will spur demand. Twelve of 22 people surveyed yesterday and March 14 forecast copper will rise next week, nine expected a decline and one was neutral.
Zinc inventories rose 7 percent to 103,525 tons, the largest one-day gain since June 14, 2005. Zinc for delivery in three months dropped $50 to $3,265 a ton.
Tin stockpiles also slumped 2.1 percent to 9,250 tons, the lowest since Nov. 11, 2005. Prices gained $75 to $13,850.
Aluminum gained $22 to $2,812 and lead rose $20 to $1,935.
To contact the reporters on this story: Chanyaporn Chanjaroen in London at cchanjaroen@bloomberg.net ; Brett Foley in London at bfoley8@bloomberg.net .
