Nickel slumps to 11-month low on stainless steel worries

13 November 2018

Nickel fell to an 11-month low on Monday on worries about stainless steel, while other base metals were pressured by uncertainty about the global economy.

Aluminium touched the weakest since August last year as speculators piled on more bearish positions.

“The macro pressures continue to weigh on the downside, such as China’s growth situation, Europe’s political uncertainty and also the dollar’s pretty strong,” said Geordie Wilkes, head of research at Sucden Financial in London.

“People are now looking to the G20 for some sort of clarification, but I’m cautious about the negotiations on the (China-U.S.) trade war.”

In addition to the macro-economic concerns, nickel was weighed down by the stainless steel market, the main source of demand for the metal.

“Stainless steel prices dropped a lot in the last two weeks because production is too high ... Investors are quite bearish about the futures market,” said Peter Peng of CRU Group.

Increasing nickel pig iron production and rising Shanghai nickel inventory also pointed to further nickel weakness in the short term, said analyst Helen Lau of Argonaut Securities.

Three-month nickel on the London Metal Exchange shed 0.7 percent to $11,375 a tonne in official open outcry trading, its lowest since Dec. 15 last year.

* DOLLAR: The dollar climbed to a 16-month high, making dollar-denominated metals more expensive for buyers paying in other currencies.

* STEEL: Shanghai rebar steel prices tumbled nearly 4 percent to the lowest since late July, pressured by worries over slowing demand in top consumer China over the seasonally weak winter period.

That weighed on zinc, mainly used in galvanised steel, with the LME price 1.8 percent weaker at $2,478.50 a tonne in official activity.

* ALUMINIUM INVENTORIES: LME on-warrant aluminium stocks MALSTX-TOTAL, those not earmarked for delivery, rose 5,550 tonnes to 745,750, data showed on Monday. They have climbed 22 percent over the past month.

LME aluminium, untraded in official rings, was bid down 0.7 percent to $1,942 a tonne, the lowest since Aug. 7 last year.

* RUSAL: The United States said on Friday it was postponing the enforcement of sanctions on Russia’s Rusal, the world’s second-biggest producer, until Dec. 12 as its top shareholder works on a plan to cut his stakes.

* COPPER: LME copper bucked the weaker trend, bid up 0.1 percent at $6,060 a tonne.

“Some Far Eastern short-covering on the London open today has been met by a resumption of CTA (Commodity Trade Advisor) selling,” Alastair Munro at broker Marex Spectron said in a note.

* PRICES: Lead was bid down 2.4 percent at $1,930 a tonne in official rings, while tin traded up 0.7 percent at $19,275.