September 19, 2017 / 10:39 AM / in 9 months

Nickel falls toward 1-month lows on fund selling

LONDON (Reuters) - Nickel prices fell on Tuesday toward the one-month lows hit last week as funds took profits, but concern about supplies from the Philippines and healthy demand, particularly from Chinese stainless steel mills, are expected to lend support.

FILE PHOTO: A worker poses with a handful of nickel ore at the nickel mining factory of PT Vale Tbk, near Sorowako, Indonesia's Sulawesi island, January 8, 2014. REUTERS/Yusuf Ahmad

Benchmark nickel on the London Metal Exchange ended down 0.8 percent at $11,140 a tonne from an earlier $10,875. Last week it touched $10,845, its lowest since Aug. 18.

“Nickel rose about 40 percent between July and early September, overshooting to above $12,000. Speculators are selling,” said Societe Generale analyst Robin Bhar.

“We estimate marginal production costs at around $10,400/$10,500, that will be an anchor for the downside. Demand from stainless and non-stainless applications is healthy.”

The market was also looking ahead to the outcome of a two-day meeting of the U.S. Federal Reserve starting on Tuesday.

SPECS: “Nickel has seen the speculative long decline from a high of 47 percent of open interest on Sept. 6, to our latest estimate of 27 percent of open interest, or 43,000 lots,” analysts at Marex Spectron said. One nickel lot is 6 tonnes.

PHILIPPINES: Philippine lawmakers last month filed a bill seeking to ban mining in watershed areas and exports of unprocessed ores and require miners to get legislative approval before operating. The Philippines is the world’s top nickel ore supplier.

INDONESIA: However, rising exports of nickel ore from Indonesia, another top producer, are expected to cap prices. To date, Indonesia has issued export permits for 8.2 million tonnes of annual nickel ore exports

Men walk past the London Metal Exchange (LME) in London, July 22, 2011. REUTERS/Paul Hackett/File Photo

STAINLESS: About two-thirds of global nickel demand, estimated at around 1.9 million tonnes, will be used to make stainless steel.

STOCKS: Nickel stocks in LME approved warehouses have held steady between 360,000 and 390,000 tonnes for much of this year, but lower canceled warrants — metal earmarked for delivery — are weighing on prices.

NICKEL DEFICIT: Data from the International Nickel Study Group showed the nickel market deficit at 400 tonnes in June compared with a 6,700 tonne shortfall in May.

ZINC: The zinc price was softer at $3,096 from Monday’s close at $3,097. Zinc is holding above $3,000 on expectations of shortages, but higher prices are likely to mean idled capacity is dusted off, production raised and new capacity brought forward.

ZINC HOLDINGS: One dominant and one large holding of zinc cash contracts and warrants are fuelling concern about metal availability for nearby delivery, traders said. That has pushed the premium for the cash over the three-month contract to nearly $20 a tonne, its highest since May 2015.

DOLLAR: The lower U.S. currency, which makes dollar-denominated metals cheaper for holders of other currencies, helped bolster metal prices after New York opened. [FRX/]

ELSEWHERE: Copper ended up 0.1 percent at $6,539, aluminum rose 1.7 percent to $2,124, lead gained 1.3 percent to $2,420 and tin slipped 0.2 percent to $20,650 a tonne.

Editing by Louise Heavens and Adrian Croft

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