Xstrata Says Supply Disruptions Support Nickel, Copper Prices

By Chanyaporn Chanjaroen

Aug. 6 (Bloomberg) -- Xstrata Plc, the world's fourth- largest copper and nickel producer, said supply disruptions will support prices for both metals this year by partly compensating for any weakening in demand.

Labor strikes, energy shortages and maintenance cut nickel supply by about 70,000 metric tons in the first half, Zug, Switzerland-based Xstrata said today in its earnings statement. That's more than all the nickel stockpiled in warehouses monitored by the London Metal Exchange.

Nickel has slumped 33 percent this year, the most of all the main industrial metals traded on the bourse. The metal accounted for 18 percent of Xstrata's sales last year. Demand from China, the world's largest consumer, will probably improve toward the end of this year, the company said.

There is a risk output may be suspended by some producers of nickel pig iron, used as an alternative to refined nickel in China, because of higher energy, raw material and transport costs, Xstrata said.

Demand for nickel among stainless-steel mills, the biggest users, is still weak in the U.S. and Europe, the company said. Usage in jet engines and wind turbines is ``robust,'' it said.

Supply of copper from mines is ``tight,'' obliging smelters to reduce processing fees as they compete for supply, Xstrata said. Copper has climbed 15 percent this year, reaching a record $8,940 a ton on July 2. The metal accounted for 45 percent of the Xstrata's sales last year.

To contact the reporter on this story: Chanyaporn Chanjaroen in London at cchanjaroen@bloomberg.net.