Nickel Rises to Record in London for 5th Day on Supply Concern
By Chanyaporn Chanjaroen Jan. 23 (Bloomberg) -- Nickel gained to a record for a fifth consecutive session in London on supply concern triggered by declining stockpiles and labor talks at Xstrata Plc's Sudbury unit in Canada. Tin advanced to the highest since at least 1989. In the past year, inventories of nickel tracked by the London Metal Exchange have plunged 86 percent to 5,064 metric tons, less than two days of global usage. Zug, Switzerland-based Xstrata has about a week to settle a labor contract with more than 1,000 workers at the Sudbury nickel mine and smelter unit, or face a strike once the current accord expires Jan. 31. ``Nickel is very tight, supported by stainless-steel production expansion and concerns about Xstrata,'' Jon Bergtheil, head of global metals strategy at JPMorgan Securities Ltd. in London, said today by phone. Bergtheil has tracked metals for almost three decades. Nickel for delivery in three months gained $150, or 0.4 percent, to $37,450 a ton as of 12:01 p.m. local time. Earlier, it traded at $37,600, beating yesterday's record by $299. The metal, used in stainless steel, has advanced 13 percent this year, outpacing all other LME-traded metals, as steel mills increased production. Eramet SA, owner of the world's largest ferronickel smelter, cut output at its New Caledonia unit by 27 percent due to a strike that lasted for almost four months until last week. Usage of nickel will beat production by 3,600 tons this year, following a deficit of 23,300 tons in 2006, Deutsche Bank AG said Jan. 12. Tin Supply Disruption A shortage of nickel on the LME is the worst in three months. Metal for immediate delivery traded at $2,300 a ton above the benchmark three-month, the widest gap since Oct. 17. In a market with inadequate supply, prices of nearby contracts are more expensive than longer-dated ones, a situation known as a backwardation. Still, the metal's rally may discourage some investors from buying. Record prices make ``it a little bit more difficult to increase exposure there,'' David Lilley, a partner at Red Kite Management Ltd., which has base-metals hedge funds worth more than $1 billion, said in an interview on Jan. 20. Tin, used in electronic soldering, gained as much as $335, or 2.8 percent, to $12,125, the highest since at least 1989. The least-traded metal on the LME, it has risen 63 percent in the past 12 months amid reduced supply from Indonesia, the world's second-largest producer of the metal. Indonesia closed 20 smelters in October that it said didn't have mining permits. A decree issued yesterday aims to limit exports of refined tin from the Southeast Asian country because of quality problems. Tin-Mining Controls Only companies with mining licenses and who have paid royalties can export tin with a minimum purity of 99.85 percent, Diah Maulida, director general of foreign trade at the Ministry of Trade, said today by phone. Copper dropped $5, or 0.1 percent, to $5,615 a ton. The contract has lost 36 percent since trading at a record $8,800 on May 11 on concern that demand growth will slow following China's declining imports last year and a 14 percent drop in U.S. usage. China and the U.S. are the largest users of the metal. Prices will rebound on rising industrial and housing demand in China and the U.S., Red Kite's Lilley said. The metal is now at a ``fair value,'' and investors should buy it, he said. Lilley also favors aluminum. Among other LME-traded metals, aluminum rose $33 to $2,790 and lead gained $15 to $1,660. Zinc increased $10 to $3,700. To contact the reporters on this story: Chanyaporn Chanjaroen in London at [EMAIL PROTECTED] . Last Updated: January 23, 2007 07:11 EST --------------------------------- Bored stiff? Loosen up... Download and play hundreds of games for free on Yahoo! Games.
