MELBOURNE, Mar 31: London nickel tumbled three percent to near six-year lows on Tuesday on the back of momentum selling and was set to end the month down nearly 10 percent, as weak stainless steel demand and record supply pummelled prices.
Nickel prices have nearly halved since hitting two-year highs above $21,000 last May, as an expected supply crunch in China failed to arise and LME stocks swelled to record peaks.
‘The market last year got itself into a pretty consensus view of Indonesia’s ore exports exiting the market and providing the ground work for a supply crunch in China and hence a price spike,’ said analyst Lachlan Shaw of UBS in Melbourne.
‘It seems to me that the supply crunch and price spike thesis is getting pushed further out,’ he said. Three month nickel on the London Metal Exchange extended a selloff to $12,400, its weakest since May 2009, before paring losses to $12,740 by 0200 GMT, down 9.6 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. <0#MNISTX-LOC>
Traders said selling by momentum-based funds had driven the powerful selloff. The price fall led to some brief arbitrage opportunities for LME nickel on Tuesday before prices partly recovered, a trader said. In other metals, LME copper was flat around $6,077 a tonne after after early gains of around half a percent, following a drop of nearly 2 percent on Friday. The most-traded June copper contract on the Shanghai Futures Exchange steadied at 43,630 yuan ($7,033) a tonne, while SHFE nickel stayed mired down 3.7 percent. A drop off in China’s property sector is hurting demand for metals such as for copper and nickel, used both in construction and in appliances to fit out new properties. 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 that is imperilling the world’s second-biggest economy.
In news, aluminum maker Alcoa Inc said on Monday it will shut its only remaining smelter in Brazil, the latest victim of a toxic mix of weak metal prices and high energy costs.
(AGENCIES)
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