Nickel Falls for Third Day in London as Stocks Show Weak Demand

By Chanyaporn Chanjaroen

March 2 (Bloomberg) -- Nickel fell for a third day in London as the highest stockpiles in almost 14 years signaled weak demand for the metal used to make stainless steel.

Nickel declined almost 15 percent in the first two months, the most among metals traded on the London Metal Exchange. Inventories monitored by the bourse, at the highest since June 1995, are set to rise above 100,000 metric tons “in a matter of days rather than weeks,” said Neil Buxton, managing director of GFMS Metals Consulting Ltd. That would equate to 8 percent of world output, according to RBS Global Banking & Markets.

“The key factors that have driven prices lower are still prevalent,” Buxton said today by phone from London. “The stainless-steel sector has to absorb the bad economic environment. We don’t see any pickup in demand.”

Nickel for delivery in three months lost $271, or 2.7 percent, to $9,729 a ton by 12:04 p.m. in London.

Losses and job cuts at companies such as Acerinox SA, Spain’s largest stainless steelmaker, have eroded demand for nickel and caused stockpiles on the LME to jump more than tenfold in the past two years. Prices may fall below $8,850 a ton, which would be the lowest since July 2003, said Buxton, who forecast the metal will post a surplus for a third consecutive year in 2009.

China, the world’s largest metals consumer, won’t buy nickel for its strategic reserves for now, according to the China Nonferrous Metal Industry Association.

China Buying

There’s “no such plan” for the State Reserve Bureau to buy the metal from domestic smelters, said the association’s Deputy Chairman Wen Xianjun, over the phone in Beijing. Wen didn’t give details. The group advises on government policies.

The country may buy 10,000 tons to 20,000 tons of the metal, Reuters had reported citing unidentified people.

China has bought aluminum, zinc, corn and cotton to support domestic producers as prices dropped and exports fell the most in almost 13 years in January.

Copper declined $83, or 2.4 percent, to $3,365 a ton. LME- monitored copper stockpiles fell 5,625 tons, or 1 percent, to 536,675 tons, the biggest daily drop since Oct. 21. Of the total, 4,900 tons left Asian warehouses and the rest from Europe.

Hedge-fund managers and other large speculators increased their net-short position in the week ended Feb. 24 to 27,494 contracts on the Comex division of the New York Mercantile Exchange, the Washington-based commission said in its Commitments of Traders report Feb. 27. That’s the largest since January 1993, according to Bloomberg data.

Net-short positions rose by 67 contracts from a week earlier, according to the report.

Among other LME traded metals, lead fell $6 to $1,040 a ton, and zinc fell $20 to $1,108 a ton. Aluminum slipped $17 to $1,325. Tin lost $100 to $10,825 a ton.

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