Nickel and lead hit highs on tight supply
By: Reuters
Published: 4 May 07 - 12:23
Nickel and lead hit new highs and copper touched a 10-month record on Friday on strong demand and supply worries following the previous session's rally.
Nickel for delivery in three months rose 1,8% to a record high of $50 700 on the London Metal Exchange and by 0921 GMT it was indicated at $50 100/50 300, up $300 from Thursday's close.
"There is no really negative catalyst in the short term in the nickel market, stainless demand is apparently holding up very well," analyst Andrew Keen at Sanford C. Bernstein said.
LME stocks of the metal, used mostly in stainless steel, fell to 4 716 t, of which 3 354 t, less than one day's worth of consumption was available to the market.
"It is looking like a particularly tight market this year," Keen said, adding a supply response would be seen first in 2008.
The rally in metal prices fuelled the mining giants on the London Stock Exchange with shares in Rio Tinto, Lonmin and Xstrata up nearly 3 percent.
"Given that the nickel market is set to be tight again in 2008... we have raised our forecast to $50 000," analyst Michael Widmer at Calyon said in a report.
Although stainless producers had indicated that they would start to cut output, this had not fed through into lower nickel demand, Widmer said and revised his 2007 forecast upwards to $44 080 from a previous forecast at $34 580.
Lead touched a contract high of $2 092 in early trade and was quoted at $2 069/2 073 versus $2 080 on Thursday.
A tight market and supply worries underpinned lead.
Trading was subdued with Japanese and Chinese consumers away for a Golden Week holiday.
"It might be quite interesting on Monday because the States are open, the Chinese are back in and we are shut," an LME trader said, referring to the LME being shut for May Day holidays.
Copper was eyeing a record of $8 800 set last May, touching a fresh 10-month high of $8 178 in early trade.
Later copper eased to $8 110/8 130, down $65 from Thursday.
"The market looks steady at the moment, but before the long weekend we might see some small book-squaring, so we would expect a little drift on the downside," another LME trader said.
LME inventories have fallen to levels last seen in mid-November at 150 925 t and tightness in the copper concentrate market was supportive to firmer prices.
"A looming shortage of copper concentrates and China's SRB (State Reserve Bureau) has likely re-stocked between 50,000-100,000 tonnes of refined copper," a Deutsche Bank report said pointing to important developments in the market, citing the consultancy Bloomsbury Mineral Economics.
There were signs that Chinese buyers imported more metal than they actually needed in the beginning of the year, Widmer said, but he added the imports would remain strong in 2007.
Widmer forecast cash copper to trade at an average of $6 920 in 2007.
LME zinc rose above the key psychological level of $4 000 in the previous session, triggered by falling inventories, a Peruvian strike and disruption at Xstrata's McArthur River lead-zinc mine in Australia.
Zinc was flat at $4 030/4 040 against Thursday's close, when it gained more than 4 percent.
Aluminium eased to $2 820/2 825 against Thursday's $2 850 and tin fell to $14 200/14,400 down from $14 450.
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