Nickel Falls in London; 9-Year High Stockpiles Show Weak Demand

By Chanyaporn Chanjaroen

Nov. 25 (Bloomberg) -- Nickel fell for the first time in three days in London as stockpiles reached a nine-year high, underscoring weaker demand for stainless steel. Copper also dropped.

Inventories of nickel tracked by the London Metal Exchange have soared 34 percent since the end of June to 62,442 metric tons, the highest since February 1999. Stainless-steel makers, the largest users of the metal, have been cutting production in response to falling demand from the building industry.

“The dominant feature in the nickel market is the miserable demand environment,” said Neil Buxton, managing director of London-based GFMS Metals Consulting Ltd.

Nickel for delivery in three months lost $175, or 1.6 percent, to $10,500 a ton in London. The contract has lost 60 percent this year, the largest drop among the six primary metals on the exchange.

The metal is heading for a second consecutive yearly drop after falling 21 percent in 2007. ThyssenKrupp AG, Germany’s largest steelmaker, needs to extend the holiday closing period of three plants to four weeks as demand wanes for stainless steel, Rheinische Post reported today, citing an unidentified spokesman. Tummarello Daniel, a spokesman for the company in Duesseldorf, didn’t immediately respond to an e-mail seeking comment.

BHP Billiton Ltd., the world’s largest mining company, today scrapped its $66 billion offer for Rio Tinto Group, citing the turmoil in global markets. It also said it would take a $2.1 billion charge to write down the value of its Ravensthorpe and Yabulu nickel operations in Australia.

‘Heavily Delayed’

“Ravensthorpe is a heavily delayed project with a very cautious ramp-up schedule,” said Andrew Keen, an analyst at Sanford C. Bernstein Ltd. in London. “This announcement indicates that some of the production problems that have plagued other nickel start-ups may also apply to Ravensthorpe.”

OAO GMK Norilsk Nickel, the world’s largest producer of the metal, suspended two nickel mines in Western Australia on rising costs and plummeting prices. They produce about 10,000 tons a year.

Copper Falls

Copper dropped $55, or 1.5 percent, to $3,695 a ton. LME- monitored copper stockpiles added 2,825 tons, or 1 percent, to 287,225 tons, taking this year’s increase to 45 percent.

On the Comex division of the New York Mercantile Exchange, copper futures for March delivery fell for the fourth time in five sessions, dropping 1.75 cents, or 1 percent, to $1.654 a pound.

Chile, the world’s biggest copper supplier, cut its price forecast for the metal next year by more than half to $1.60 a pound ($3,527 a ton) as faltering global economies reduce demand.

The state-run Chilean Copper Commission reduced its forecast for Chilean output by 1.6 percent to 5.36 million tons, according to a report on its Web site.

Lead lost $30, or 2.5 percent, to $1,190 a ton and zinc gained $30, or 2.5 percent, to $1,250 a ton. Aluminum rose $10 to $1,810 a ton and tin gained $100, or 0.8 percent, to $12,900 a ton.

PT Timah, the world’s second-biggest tin miner based in Indonesia, may shift some of its output to make tin-derived products such as tin solder and chemicals as the price of the metal has fallen.

Timah may benefit more from selling tin-derived products than from selling the metal to traders, Corporate Secretary Abrun Abubakar said in Jakarta today. The company may shift production next year if “we think the price is low,” he said, without saying how much Timah would set aside.

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