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Nickel hits two-year low on weak demand

Anna Stablum and Pratima Desai

Friday, July 25, 2008

LONDON — Nickel hit a two-year low Friday as worries about demand from stainless steel mills mounted, while copper managed to end in positive territory despite growing fears of a global economic slowdown.

Three-month nickel on the London Metal Exchange touched $18,250 (U.S.) a tonne, the lowest since June 2006. It ended at $18,450 from $18,800 at the close on Thursday. The metal has fallen by nearly 50 per cent since early March.

“It is no wonder that prices have fallen with demand being so weak, stainless steel consumers are betting the price will fall further and therefore delaying buying,” said Leon Westgate, analyst at Standard Bank.

Nickel fell 6 per cent Thursday after stainless steel producer Outokumpu said it expected delivery volumes in the third quarter to fall and expressed concern over the outlook for next year on the softening macroeconomic picture.

However, some analysts said prices had fallen too far and that low stocks could help nickel regain $20,000 a tonne.

Stocks of nickel in LME warehouses, at around 43,000 tonnes, are down around 17 per cent since the middle of April.

“We expect nickel to return to the $20,000 to $25,000 a tonne range soon, which is fundamentally justified in our view,” said Eugen Weinberg, analyst at Commerzbank