Tuesday, 31 March 2015 17:01
LONDON: Nickel extended recent hefty losses on Tuesday, sliding to near six-year lows under $ 13,000 a tonne and putting the metal on course to end March down almost 10 percent, as record supply and weak stainless steel demand pummelled prices.
Nickel has almost halved in value since hitting two-year highs above $ 21,000 last May, as an expected supply crunch in China failed to materialise while LME stocks hit record highs.
While the market has concentrated heavily on the supply scenario, Nic Brown, head of commodities research at Natixis, said demand was also a major concern.
“We’ve looked at what’s going on in the Chinese carbon steel market and while steel and stainless steel are fundamentally different, there’s a significant concern that what is happening in the steel market in China may have very similar parallels for stainless steel and therefore Chinese demand for nickel.”
“If demand was constant (in the nickel market) and supply was being affected in the way that people have analysed, you should have seen the nickel market moving into deficit and that simply hasn’t happened,” he added.
Three-month nickel on the London Metal Exchange extended a selloff to $ 12,400, its weakest since May 2009 in Asian trade. It later pared losses to $ 12,600 by 1031 GMT — down over nine percent for the month and almost 16 percent for the year to date.
LME stocks are sitting at records above 430,000 tonnes, equivalent to almost three months of global use.
Traders said selling by momentum-based CTA (commodity trade advisor) funds had driven the powerful selloff.
“We haven’t seen large activity going on by either local trading house or the funds,” said a source in Shanghai.
Russia’s Norilsk Nickel, the world’s second-largest nickel producer, said its 2014 core earnings rose 35 percent year-on-year to $ 5.7 billion, beating forecasts. .
In other metals, LME copper lost 1.2 percent to $ 6,008.50 a tonne after early gains of around half a percent.
A drop off in China’s property sector has hurt demand for metals such as for copper and nickel.
China on Monday courted home buyers with a bigger tax break as it cut down payment requirements for the second time in six months, stepping up a fight against sliding house prices.
Aluminium slipped 0.6 percent to $ 1,786.50, while tin fell 1.7 percent to $ 16,760. Zinc lost 1.1 percent to $ 2,086.50, while battery material lead was at $ 1,800, down 1.4 percent.
Copyright Reuters, 2015
