Nickel Rises to a Record After Xstrata Rejects Offer From Union

Nickel Rises to a Record After Xstrata Rejects Offer From Union

Nickel rose to a record for an eighth consecutive session in London, heading for a second weekly gain, after Xstrata Plc rejected an offer from a labor union at a Canadian unit that accounts for 4 percent of global supply.

The metal used in stainless steel advanced on speculation that Zug, Switzerland-based Xstrata may not reach a contract accord with the union by Jan. 31, when the existing labor contract expires. Both sides now have to restart talks from the beginning, the Canadian Auto Workers Union local 598 said today.

“If there’s a strike, it will limit supply of the metal,” Torsten Dennin, who manages more than 100 million euros ($129 million) in a commodity fund at Deutsche Bank AG, said by phone from Frankfurt. “We are positive on nickel.”

Nickel for delivery in three months on the London Metal Exchange gained $400, or 1.1 percent, to $38,550 a metric ton as of 12:28 p.m. in London. A close at that price would mean a 6.8 percent weekly increase. Nickel earlier traded at $38,950, beating yesterday’s record by $152.

The metal has more than doubled in the past year, stoked by demand from China, the world’s fastest-growing major economy, as the nation expanded stainless-steel production. The combined supply shortfall last year and in 2007 will be 57,000 tons, BHP Billiton Ltd., the world’s largest miner, said in December.

Xstrata’s Sudbury smelter produced 63,000 metric tons of unrefined nickel, called nickel-in-matte, in 2005, Toronto-based Xstrata spokesman Ian Hamilton said yesterday. The smelter processes ore from Sudbury’s mines as well as from Quebec and other parts of Ontario.

Less production at Sudbury may force users to tap already- dwindling inventories. LME-monitored stockpiles of the metal have plunged 86 percent in the past 12 months to 4,878 tons, or less than two days of global consumption.

Widest Gap

That’s skewing prices on the LME. Metal for immediate delivery traded as much as $3,400 a ton more then metal for delivery in three months on Jan. 24, the widest gap since Aug. 31. In a market with inadequate supply, nearby prices are higher than those for later dates, a situation known as a backwardation.

Nickel’s backwardation attracted buying by funds in longer- dated contracts, Dennin said. Buyers of forward contracts make gains when those contracts expire, garnering the higher price for immediate delivery, and they buy new and cheaper contracts with later delivery dates.

Copper dropped $95, or 1.6 percent, to $5,765 a ton after a fifth consecutive LME stockpile increase, taking its weekly gain to 2.9 percent. Inventories rose 4,325 tons, or 2.1 percent, to 207,700 tons, the LME said today.

The metal, used in wires and pipes, may gain next week on speculation that demand from China, the largest user, is rising after the fastest economic growth in 11 years.

Nine of 15 people surveyed yesterday and Jan. 24 by Bloomberg forecast copper will rise next week. Three expected a drop and three said little change. Copper has gained 3.8 percent this week, reducing its decline this year to 8.1 percent.

Among other LME-traded metals, aluminum was unchanged at $2,792 a ton, lead gained $2 to $1,705 and tin was flat at $12,300. Zinc dropped $60 to $3,650 a ton.


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