Nickel Rises in London on Speculation Surplus Is Being Curbed

By Claudia Carpenter

Feb. 4 (Bloomberg) -- Nickel rose for a third day in London on speculation production cuts are starting to curb a surplus of the metal used mostly in stainless steel. Copper also gained.

Supplies of nickel in warehouses monitored by the London Metal Exchange fell 114 metric tons to 83,964 tons, narrowing this year’s climb to 7.1 percent. Stockpiles are up 47 percent for copper and 22 percent for aluminum over the same period. BHP Billiton Ltd., the world’s largest mining company, closed an Australian nickel mine last month after prices plunged.

“Inventories of nickel are not rising as sharply as the other metals, suggesting the supply-demand balance for nickel has stabilized a bit,” said Daniel Smith, an analyst at Standard Chartered Plc in London. “We’re not looking for a huge surplus this year because supply has been cut back so sharply.”

Nickel for delivery in three months gained $195, or 1.7 percent, to $11,800 a ton at 1:22 p.m. local time, paring a climb of as much as 3 percent. The contract has added 5.4 percent this week.

Reductions in output are greater for nickel than any other metal, equal to almost 14 percent of last year’s production, Citigroup Inc. estimates. Nickel supply will exceed demand by 50,000 tons this year, according to Smith.

“Deliveries into LME inventories are set to subside,” Michael Widmer, an analyst at BNP Paribas SA in London, wrote yesterday in a research report. “There is no need for those producers who cut to deliver any longer into warehouses.”

‘Awful’ Demand

Nickel demand is “awful,” with first-quarter stainless- steel consumption expected to decline more than 20 percent from a year earlier, Smith said. Outokumpu Oyj, the world’s fourth- biggest stainless-steel maker, said yesterday it’s operating at half of capacity and reported a wider-than-estimated loss.

Aluminum for delivery in three months rose $18, or 1.3 percent, to $1,423 a ton. Inventories in warehouses monitored by the LME dropped 775 tons to 2.8 million tons, the first decline since Nov. 7.

Copper advanced $51, or 1.5 percent, to $3,424 a ton. China’s stockpiling agency is buying the metal from domestic warehouses and from overseas, Reuters reported, citing trade sources. Kevin Norrish, an analyst at Barclays Capital in London, said last week the bureau had obtained at least 50,000 tons on the international market.

Shang Fushan, director of the copper department at the China Nonferrous Metals Industry, said today he was unaware of the buying. Shanghai-based analyst Bonnie Liu of Macquarie Group Ltd. said she didn’t believe they had bought.

Tin advanced $275 to $11,275 a ton, and zinc gained $1 to $1,175 a ton. Lead jumped $20 to $1,190 a ton.

To contact the reporter on this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net