Nickel hits new record high, copper slips By Pratima Desai
LONDON (Reuters) - Nickel prices soared to a new record high on Monday on buying by investors who expect prices to rise due to low stocks and supply shortages, analysts said.
Copper slipped on news of a rise in stocks, while aluminium held firm on worries about supplies.
Nickel for delivery in three months on the London Metal Exchange stood at $36,600/36,800 a tonne by 1115 GMT, down from the new record of $37,300, but above Friday's $36,300 close.
Nickel prices have jumped 170 percent since January 2006 -- when stocks were around 37,000 tonnes -- on growing expectations of supply shortages.
Available stocks of nickel in LME warehouses stand at around 4,000 tonnes, little more than one day's global consumption.
"It's a combination of very tight supply and very low stocks and demand from the stainless steel industry is still pretty strong," Wiktor Bielski, analyst at Morgan Stanley said.
Anecdotal reports have suggested that demand from stainless steel makers could be slipping, analysts said.
But stainless steel demand growth is forecast to grow at around 7.5 percent this year and is likely to push nickel prices to new highs, analysts said. About two thirds of world nickel output is used by stainless steel makers.
The trigger for the latest rally was the possibility of a strike at London-listed Xstrata's nickel operations in Sudbury, Ontario. Workers have given union leaders a strike mandate and pay talks continue.
Traders said hedge funds had snapped up nickel offered by commodity indices rebalancing their weightings of the various sectors earlier this month.
BESIEGED
Copper prices slipped to $5,550/5,570 a tonne from $5,620 on Friday. Copper has been besieged by worries about the economic slowdown in the United States, by falling demand and rising stocks as more production comes onstream.
Copper prices have tumbled by more than 30 percent since hitting a record high of $8,800 in May and are down about 10 percent so far this year.
Stocks of copper at around 193,000 tonnes compare with less that 100,000 at the beginning of last year and little more than 25,000 tonnes in July 2005.
But the market is well supported by bargain hunters and consumer buyers, Standard Bank said in a research note.
Aluminium was firm at $2,720/2,725 from $2,713 at the close on Friday.
Traders say power shortages in South Africa, which may disrupt aluminium smelting, could underpin prices after power producer Eskom warned of a shortage of generating capacity.
Mining giant BHP Billiton, the world's sixth-biggest primary aluminium producer, said further power cuts in coming weeks may affect aluminium production at two smelters in South Africa and one in Mozambique.
Another potential source of support for prices comes from Guinea where a general strike has disrupted shipments of bauxite -- the raw material used to make aluminium.
But analysts say that where aluminium prices end up depends on whether the holder of 90 percent of available material -- around 600,000 tonnes -- wins the battle against another player who has bet prices will fall and sold around 900,000 tonnes.
"The aluminium market is all about what's going on between those two funds," the LME trader said. "Apparently, both positions have been rolled forward into March."
Still, the squeeze in nearby months is reflected in the backwardation -- the premium of cash metal over the three-month price -- at around $100 from $30 at the beginning of this year and $120, the highest since 1990, last Monday.
Zinc was down at $3,620/3,630 a tonne from $3,650 on Friday, lead was higher at $1,605/1,610 from $1,560 and tin was up at $11,650/11,750 from $11,400/11,450.
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