LONDON: Zinc dipped on Friday as Chinese inventories rose while copper and nickel struggled to move higher after a rally moved too quickly based on a surge in demand from electric vehicles (EVs).
A proposal to scrap US subsidies for EVs helped to dampen investor excitement during the LME Week industry event in London over the potential for strong demand from the EV growth story for metals such as copper and nickel.
Metals extended losses or pared gains after the dollar index firmed on the back of strong US economic data.
Three-month London Metal Exchange nickel has climbed by more than $1,100 a tonne since Monday, marking its biggest two-day jump in three years on Tuesday and Wednesday on positive sentiment about EVs.
"Right now, if you look at the prevailing fundamentals, prices are probably above what is justified after all the euphoria of this week," said Robin Bhar, head of metals research at Societe Generale.
"Between now and the next 12 months we've got adequate supply and spreads are generally in contango. Nickel is probably $1,000 above fair value, so that needs to correct."
Most hedge funds close out their fiscal year at the end of November so will want to take profits before then, Bhar added.
The dollar rose after the release US manufacturing and services sector data that beat estimates. A firmer dollar makes commodities priced in the greenback more expensive to buyers using other currencies.
ZINC: LME benchmark zinc had shed 1.3 percent to $3,215 a tonne by 1500 GMT after inventories rose in China.
SHANGHAI STOCKS: Weekly data on Friday showed zinc inventories in warehouses monitored by the Shanghai Futures Exchange jumped 22 percent while copper stocks climbed 18 percent, indicating supplies were adequate.
COPPER: LME three-month copper fell 0.8 percent to $6,876 a tonne after ending the previous session little changed.
EV SUBSIDIES: Also weighing on nickel and copper was the proposal by US House Republicans to eliminate the $7,500 tax credit for electric vehicles at the end of the year.
LME NICKEL: LME three-month nickel edged up 0.1 percent to $12,620 a tonne. The contract hit its highest in more than two years at $13,030 on Wednesday.
ALUMINIUM: LME aluminium added 0.1 percent to $2,175 a tonne, with looming production curbs on Chinese smelters likely to come back into focus next week as traders return from LME Week.
ALUMINIUM MARGINS: A jump in raw material costs has trimmed aluminium producers' strong margins in recent months, an executive of Russian aluminium giant Rusal said.
PRICES: Lead climbed 0.9 percent to $2,465 a tonne, while tin slipped 1.3 percent to $19,400.
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