Nickel hits four-month low

Nickel prices fell more than seven percent on Tuesday as worries about falling demand intensified after news that China may cut stainless steel output, while copper prices slipped. Two-thirds of all nickel mined is used to make stainless steel.
Expectations of strong demand from Chinese steel makers had helped lift nickel for delivery in three months to an all-time high of $51,800 per tonne in May. But on Tuesday it fell to $37,500 a tonne, $2,900 or 7.2 percent below its Monday close and its lowest since February 15. At the close it was at $37,600.
Chinese steel producers said they were considering cutting production in order to support stainless prices. "We anticipate price risk to continue to the downside as market participants digest the nickel market's easing fundamentals," Barclays Capital said in a note. Peak nickel prices have encouraged substitution away from high nickel-bearing grades of stainless, known as austenitics, in favour of ferritic grades that contain less nickel.
"There is certainly a tendency to produce more ferritics," the raw materials buyer at a major European steel maker said. "There is demand from our customers to offer something that is not as expensive as austenitics."
Substitution and production cutbacks are being seen Worldwide, with POSCO, the world's third-largest steel maker, focusing on no-nickel stainless steel products as record nickel prices squeeze profit margins.
Nickel's tumble was sparked by changes the LME made to trading rules earlier this month to ease tight supplies. "Changing lending rules has triggered selling, and now the key $39,000 level seems to be breached," an LME trader said.
Nickel looked to be the most vulnerable of all the metals. "A break of $39,000 on a two-day closing basis could set up another leg lower to the mid-$30,000 range," analyst Edward Meir at Man Financial said in a report.
Copper for three-months delivery ended at $7,430, down $110 from Monday, when it hit a five-week high of $7,695. "We failed to hold above the $7,600 level yesterday so now its coming off to the low end of the range," another LME floor trader said.
In New York, copper futures extended a reversal from Monday's almost- five-week peak. Most-active September copper ended down 2.05 cents to $3.3995 a lb on the New York Mercantile Exchange's COMEX division, after dealing in a relatively quiet band between $3.3620 and $3.4190.
Falling LME inventories and strike threats supported copper, mainly used in wiring and plumbing, which hit a record high of $8,800 in May last year. Stocks of copper in LME-registered warehouses fell 1,650 tonnes to 114,950 tonnes, their lowest since last October and less than three days of global consumption.
Workers have walked off the job at Xstrata's Canadian Copper Refinery (CCR) in Montreal but the Anglo-Swiss miner said it had no meetings planned with unionised workers.
In Chile, subcontract workers at Codelco plan to meet in a general assembly on Thursday to give the final go-ahead to a strike at the world's largest copper producer. Workers at Southern Copper's two copper mines and a smelter in Peru will start a strike June 23. Lead closed up $10 at $2,400, still within range of its record high of $2,430 hit on Monday. Aluminium was up $1 at $2,706, while zinc shed $75 to $3,610. Tin ended lower at $14,100/14,150 against it last quote on Monday at $14,175/14,200.