Nickel clings to one-year high, but rally seen as excessive

LONDON: Nickel slipped on Tuesday and analysts said prices that were still near one-year highs for the metal used to make stainless steel were not supported by most fundamentals.

Benchmark nickel on the London Metal Exchange (LME) ended 0.9% lower at $14,170 per tonne after declining 3% in the previous session.

"We are not confident that this level can be sustained because the second half is going to represent changing conditions in Chinese stainless steel demand and therefore destocking," said Macquarie analyst Vivienne Lloyd.

Speculators and physical buyers have pushed prices on the LME up 25% within two weeks.

Reuters reported Chinese firm Tsingshan Holding Group has been buying large quantities of nickel on the LME to supplement its own output.

STAINLESS DEMAND: Nearly 70% of global nickel consumption, estimated at 2.4 million tonnes this year, is accounted for by stainless steel mills, a majority of which are in China.

NICKEL STOCKS: Headline nickel inventories in LME-approved warehouses are at their lowest since January 2013 at 100,422 tonnes.

A single entity holds between 50% and 79% of LME nickel warrants, exacerbating fears over short supplies.

TRADE TENSIONS: China strongly opposes US sanctions on a Chinese energy firm accused of violating curbs on Iran's oil sector imposed over Tehran's nuclear programme, its foreign ministry said.

The potential standoff over the sanctions could escalate long-standing tensions between the world's two largest economies and further sap demand for metals.

CHINA GROWTH: China's industry ministry said "arduous efforts" will be needed to achieve this year's industrial output growth target, as trade protectionism weighs on exports and clouds the outlook for the world's second-largest economy.

COPPER OUTPUT: For the first four months of the year, the global copper market was in a 155,000-tonne deficit compared with a 64,000-tonne deficit in the same period a year earlier, the International Copper Study Group said.

ALUMINIUM: Canada's exemption from US tariffs on imports of aluminium metal has boosted earnings at the Canadian operations of companies such as Rio Tinto and Alcoa, but has not cut costs for US consumers.

COLUMN: Global aluminium production fell by 0.5% in the first half of this year, according to the International Aluminium Institute.

ZINC TIME SPREADS: The discount of cash LME zinc to the three-month contract  touched $13 a tonne on Monday, the biggest discount since September last year, indicating ample near-term supplies.

DOLLAR: Most metals were under pressure from a stronger US dollar. The currency was boosted by a deal between US President Donald Trump and congressional leaders on a two-year extension of the debt limit.

PRICES: Copper  shed 0.8% to $5,968 per tonne, aluminium was unchanged at $1,816, zinc added 0.6% to $2,432, lead ended 1.1% higher at $2,031, while tin shed 1% to $17,675, after touching is lowest since 2016.