Nickel Heads for 2nd Weekly Gain as Canada Labor Talks Continue
By Chanyaporn Chanjaroen
Jan. 26 (Bloomberg) -- Nickel headed for its second consecutive weekly gain as Xstrata Plc kept negotiating with a Canadian labor union to avoid a strike at the Sudbury mining and smelting unit, which accounts for 4 percent of global supply.
The Zug, Switzerland-based company made an offer to the union that includes a cash bonus for early ratification of an accord, company spokesman Ian Hamilton said today in a phone interview from Sudbury, Ontario. Earlier today, Canadian Auto Workers Union local 598 said Xstrata rejected its offer, forcing both sides talks to start from scratch.
``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 dropped $75, or 0.2 percent, to $38,075 a metric ton as of 5:45 p.m. in London. A close at that price would mean a 5.5 percent weekly increase. Earlier, nickel rose as much as 2.1 percent to a record $38,950.
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 is trying to settle a labor contract at Sudbury before the existing one expires Jan. 31. Union workers have voted to strike on that date if a new deal hasn't been reached.
Dwindling Stockpiles
Sudbury's 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.
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 Falls
Copper dropped $50, or 0.9 percent, to $5,810 a ton after a fifth consecutive LME stockpile increase. 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 rose $3 to $2,795 a ton, lead slipped $28 to $1,675 and tin dropped $100 to $12,200. Zinc slid $45 to $3,665.
To contact the reporters on this story: Chanyaporn Chanjaroen in London at cchanjaroen@bloomberg.net
Last Updated: January 26, 2007 12:52 EST
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