Signs of lower demand hammers nickel, risk aversion returns Tue, Sep 4 2007,
13:41 GMT
http://www.afxnews.com
LONDON (Thomson Financial) - Nickel took a hammering as more signs emerged
stainless steel producers are using less of the metal.
Weak equity markets meanwhile, which are a sign of where demand for metals is
heading, did little to help underpin prices.
Nickel, used mostly for stainless steel production, is down nearly 5 pct to
around 28,500 usd. The metal hit a record high of nearly 52,000 usd in May on
tight inventories, but stocks have rapidly increased since. Demand destruction
with prices at higher levels also shaved nickel's price.
News today that iron and steel company POSCO plans to cut stainless steel
prices to help invigorate demand for the fourth time this year helped sent
nickel's value spiral down.
"The news of further price cuts to stainless steel prices is indicative of
still poor physical market off-take," said JP Morgan analyst Michael Jansen.
At 2.16 pm, nickel for three-month delivery was trading at 28,400 usd against
29,850 usd at the close yesterday.
Another sign that stocks are becoming far less tight is a daily report from
the LME. Today the exchange said stocks in LME certified warehouses rose 480
tonnes to 24,804 tonnes.
Inventory tracked by the LME has risen some 732 pct since hitting a low of
2,982 in February.
"With the fundamentals not supportive of further nearby price gains we expect
prices to fall from their current levels before bouncing in the fourth quarter
of 2007 on the back of an improvement in demand," said Barclays Capital
analysts.
Meanwhile nickel, and all other base metals, were hammered as risk aversion
returned to markets worldwide.
London shares were lower today with no lead coming from Wall Street which was
closed yesterday for the US Labor Day holiday. Wall Street is looking at a
flat-to-lower open, with investors looking ahead to a key manufacturing report
and construction data to help provide direction.
In recent months, commodities have closely tracked turbulent equity markets
for signs of future demand.
If a US subprime crisis sparked-credit crunch is on the way, like many
believe it is, demand for commodities is likely to ease as investors exit
riskier markets and sell off assets like metals to raise cash to cover losses.
"A marked slowing in US economic growth, with ripple effects on other
economies, would damp the demand for all base metals," said analysts at the
Commonwealth Bank of Australia.
On Friday, market-calming speeches by US president George Bush and US Federal
Reserve chairman Ben Bernanke lent some stability and helped metals to rise
late last week.
At 2 pm (GMT) today traders will eye US August ISM data.
"Manufacturing ISM (will) providing an early barometer for the state of the
sector. In particular, the report's leading nature will allow the Fed to assess
the impact on employment and investment due to stress in financial markets,"
said UBS analyst Robin Bhar.
In other metals copper was down at 7,240 from 7,390 usd at the close
yesterday. Aluminium was down at 2,450 usd from 2,479 usd, lead fell to 2,955
usd from 3,021 usd, tin was down to 14,525 usd from 15,300 usd while zinc eased
to 2,920 usd from 3,040 usd.
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