Tin, nickel soar over supply shortfall fears
Tuesday, October 17, 2006
Tin and nickel prices have soared to their highest levels in nearly two decades on supply fears.
Tin jumped to the highest since at least 1989 on a speculation that lower production from Indonesia and Bolivia will create a supply shortfall this year.
Tin for delivery in three months on the London Metal Exchange soared as high as US$975 (HK$7,605), or 10 percent, to US$10,750 a tonne in late afternoon. That is the highest since at least 1989. Tin has risen 64 percent in the past year.
Nickel reached its highest in at least 19 years as a blockade by strikers at two mines owned by Eramet on the Pacific Island of New Caledonia limited supply of the metal used to make stainless steel.
Nickel for delivery in three months on the London Metal Exchange rose US$150, or 0.5 percent, to US$30,900 a tonne in early afternoon trade. Earlier it traded at US$31,300, the highest since at least 1987.
Timah, the world's largest tin miner, will cut output this year by 8 percent to 38,407 tonnes, Thobrani Alwi, the Jakarta-based company's president director said Monday. Mines in Bolivia, which account for about 5 percent of world supply, were damaged after fatal clashes between miners, local newspaper El Diario reported last week.
Eramet's New Caledonia smelter, the world's largest plant producing ferronickel, an alloy used by stainless- steel makers, needs ore from the mines to replenish inventory, said Pierre Alla, chief executive officer of the French company's nickel unit. Earlier this month, the International Nickel Study Group forecast global demand will exceed production.
Crude oil was little changed as the Organization of Petroleum Exporting Countries lowered its global consumption forecast and traders speculated it may fail to cut production to lift prices.
OPEC Monday trimmed its forecast for global demand and cut an estimate of the need for its own crude oil. OPEC will meet in Qatar Thursday to discuss reducing production by one million barrels a day, Qatar Oil Minister Abdullah bin Hamad al-Attiyah said.
"It's a well-supplied market right now and there are a lot of questions about growth," said Jason Schenker, an economist with Wachovia Corp.
Crude oil for November delivery rose 4 US cents to US$58.61 a barrel at 10.29am on the New York Mercantile Exchange. Futures have dropped 3.9 percent so far this month.
Brent crude oil for November delivery fell 18 US cents to US$59.34 a barrel in London. December Brent fell 25 cents to US$60.43.
Meanwhile, Treasury bond investors, who forecast lower interest rates two weeks ago, now see no chance the Federal Reserve will reduce borrowing costs until late next year as policy makers continue to warn about the threat of inflation.
Interest-rate futures show traders expect the Fed to keep its target for overnight loans between banks at 5.25 percent. Fed funds futures traded on the Chicago Board of Trade projected 20 percent odds of a cut two weeks ago. Last month, the contracts suggested a 50 percent chance for lower rates.
Treasuries posted their biggest weekly decline in four months after Fed chairman Ben Bernanke and other policymakers suggested they are unlikely to cut borrowing costs.
"The bond market was anticipating a bigger slowdown," said Joe Balestrino, who helps manage US$22 billion in Pittsburgh at Federated Investors.
"Bernanke and company have clearly sent a message that the market has misinterpreted what they think," he added.
BLOOMBERG, REUTERS
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