Nickel Falls in London as Posco Cuts Stainless-Steel Output

By Chanyaporn Chanjaroen

Sept. 9 (Bloomberg) -- Nickel fell in London as Posco, Asia's largest maker of stainless steel, plans to extend output cuts for a third month, indicating weaker demand for the metal. Aluminum and copper also dropped.

About two-thirds of nickel production is used in stainless steel. South Korea's Posco will lower output by 20 percent, or 25,000 metric tons, from the normal monthly level, Suh Young Sea, senior vice president of the stainless-steel business, said today in a phone interview.

``Nickel is kind of stuck between weak demand and high supply,'' said Stephen Briggs, a commodity strategist at RBS Global Banking & Markets in London. ``I don't think a huge bounce in prices is warranted.''

Nickel for delivery in three months dropped $150, or 0.8 percent, to $18,700 a metric ton as of 12:48 p.m. on the London Metal Exchange.

Nickel has fallen 29 percent this year, leading declines among LME-traded metals, as a slowdown in construction undermines demand for stainless steel. China's three largest producers of the alloy said last month that usage would stay weak in September.

Stockpiles of nickel monitored by the LME rose 840 tons, or 1.7 percent, to 50,166 tons, the highest since May 9, according to the exchange's daily report.

Copper, aluminum and zinc prices may slip by 5 percent to 10 percent as a slowing global economy crimps demand, Vedanta Resources Plc Chairman Anil Agarwal told reporters in Mumbai today, without providing a timeframe for the declines. The company is India's largest producer of zinc and copper.

Copper dropped $85, or 1.2 percent, to $6,863 a ton. LME- monitored copper stockpiles jumped 1,300 tons, or 0.7 percent, to 202,125 tons, the highest since March 2007.

Lower Quality

BHP Billiton Ltd., the largest mining company, expects output at its Escondida copper mine in Chile will drop as much as 15 percent because the quality of ore is declining.

``For the next two years, we've got a 10 to 15 percent production decline, and then we'll resume the trajectory it was on earlier,'' Chief Executive Officer Marius Kloppers said yesterday in an interview in New York. Supplies from Escondida, the world's biggest copper mine, increased 18 percent in 2007.

Among other metals traded on the LME, lead lost $41, or 2.2 percent, to $1,810 and tin slipped $105, or 0.6 percent, to $18,995 a ton. Zinc declined $35, or 2 percent, to $1,735.

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