Nickel prices slumped on Thursday along with other industrial metals on worries over a potential global trade war curbing economic growth and metals demand. "It started with copper and aluminium, and is now turning to those where you have length to liquidate or if you want to build fresh shorts because of fears of a global trade war," said Robin Bhar, head of metals research at Societe Generale.
"You look at equities and they are struggling, the VIX index is slightly higher, so there's clearly risk-off sentiment for the time being." Stock markets were relatively calm on Thursday after signs US President Donald Trump could spare some key trade partners from planned protectionist tariffs.
"The selling in base is also driven by CTA sell programs with some metals now seeing shorts established," Alastair Munro, of broker Marex Spectron, said in a note. He was referring to fund trading driven by computer algorithms. Benchmark nickel was the biggest decliner on the London Metal Exchange, closing down 2.4 percent at $13,270 a tonne. Nickel is the biggest speculative long on the LME, accounting for 13 percent of open interest, according to estimates from Marex Spectron.
Nickel, mainly used to produce stainless steel, was also pressured after Chinese steel and iron ore futures tumbled almost 4 percent. Also weighing on nickel were worries that China's output of nickel pig iron was expected to expand almost 15 percent this year to 447,000 tonnes, SP Angel analyst John Meyer said in a note.
Providing some support to metals, data showed that China's exports unexpectedly surged in February, suggesting its economic growth remains resilient. Three-month LME zinc slipped 0.9 percent to finish at $3,230 a tonne, the weakest since December 22. The spread of cash zinc to the three-month contract moved to a $2.80 discount for cash from a premium of nearly $50 in late February, showing healthier near-term supply.
LME aluminium was one of two LME metals in positive territory, buoyed by consumer buying, adding 0.4 percent to end at $2,106 a tonne. LME copper shed 1.7 percent to close at $6,835 a tonne after data showed China's copper imports fell 20 percent month on month in February.
LME lead dropped 1.6 percent to end at $2,337, the weakest in nearly six months. "Demand is weakening which, coupled with increasing secondary output, should ensure that prices fall back over the coming months," Commodities Economist Simona Gambarini at Capital Economics said in a note. Tin rose 0.8 percent to $21,545.
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