Nickel Falls on Speculation Demand May Slow; Copper Declines

Nickel Falls on Speculation Demand May Slow; Copper Declines

Nickel fell for a second day in London on speculation rising stockpiles signal slowing usage as producers seek alternatives to the metal in stainless-steel manufacturing. Copper also dropped.

Nickel inventories monitored by the London Metal Exchange rose 1,446 metric tons, or 27 percent, to 6,834 tons, the exchange said today in a daily report, the biggest one-day gain since Sept. 11, 2003. ThyssenKrupp AG, the world’s biggest stainless steelmaker, said yesterday that it may increase production of nickel-free stainless steel to reduce costs.

“Rising stockpiles have spooked people today because consumption has unambiguously slowed and we are starting to see demand destruction,” David Thurtell, a London-based metals analyst with BNP Paribas, said today in a phone interview.

Nickel for delivery in three months on the LME dropped $1,050, or 2.2 percent, to $47,150 a metric ton as of 1:14 p.m. local time. The metal is the biggest gainer on the LME this year, rising 42 percent.

South Korea’s Posco has said it will reduce nickel usage this year due to rising prices while Finland-based Outokumpu Oyj said last month that it will cut its stainless-steel output by about 10 percent in the second quarter because orders from customers have slowed.

Nickel has more than doubled in the past 12 months as China overtook Japan to become the world’s largest user because of its expanding stainless-steel industry. About two-thirds of nickel is used to produce stainless steel.

In response to the price increase, China is expanding production of so-called nickel pig iron, a cheaper alternative to refined nickel, using ore from the Philippines and New Caledonia, Thurtell said. Its increasing use will probably cause demand to decline further, he added.

Copper Imports

The price of nickel may drop to $40,000 a ton in the coming month if LME inventories continue to increase, John Reade, a London-based analyst at UBS AG, said in an interview today.

Copper slipped $33, or 0.5 percent, to $7,173 a ton on the LME. Copper futures for July delivery fell 2.65 cents, or 0.8 percent, to $3.276 a pound on the Comex division of the New York Mercantile Exchange as of 8:15 a.m. local time.

Rising copper prices have “triggered a buyers’ strike in China and surplus metal has ended in Shanghai Futures Exchange- registered warehouses over the past three weeks,” Reade said in a report today.

China’s copper imports rose 61 percent to 1.1 million metric tons from January to April from a year earlier. SFE stockpiles are at their highest in three years, jumping 17 percent to 99,556 tons in the week to May 18.

LME-tracked copper inventories fell for a fourth day by 0.6 percent to 137,575 tons today. That’s the lowest since Nov. 1.

Among other LME-traded metals, lead slid $30, or 1.4 percent, to $2,12 a ton after trading at a record $2,216 a ton yesterday. Aluminum dropped $25 to $2,830 a ton, zinc fell $15 to $3,695 and tin lost $150 to $13,800.

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