By Nick Trevethan
LONDON (Reuters) - Nickel hovered near a record $29,950 a tonne on
Thursday as available stocks held at about half a day of global consumption,
but slowing economic growth may dampen the longer term outlook for
metals.
"Nickel is tight, but stocks are holding. Medium term, there is potential
for more on the upside in copper, nickel and zinc," BaseMetals.com analyst
William Adams said.
But the risk of slowing economic growth, particularly in the United
States, meant the longer-term outlook was less bright.
"We will see firm demand from Asia, but I am concerned about a slowdown
in the United States," Adams said.
"The impact of higher rates and a weaker housing market may take time to
feed into metals, but if the U.S. consumer slows there will be a knock-on
effect for China and other Asian manufacturers."
New orders for U.S.-made durable goods fell by 2.4 percent in July, which
was much more than expected, as civilian aircraft and car orders tumbled, a
government report showed.
On Wednesday the National Association of Realtors reported U.S. July
existing homes sales fell to their lowest since January 2004.
"The housing market doesn't seem to be cooling; it actually seems to be
getting frigid," said Michael Metz, chief investment strategist at Oppenheimer
& Co. in New York.
Nickel gained $975 or 3.4 percent to $29,675/29,700 at midday, but
volumes were limited at 155 lots as investors steered clear of a market
crippled by low stocks.
LME-monitored warehouse stocks fell 240 tonnes to 6,426 tonnes, of which
only 1,716 were available to the market to support global consumption of 3,600
tonnes a day.
"I am amazed that the price is this high, but the supply situation
probably justifies it," a dealer said.
He added that the high prices might hurt the market in the longer term as
nickel consumers, mostly stainless steel mills, looked for alternatives.
Copper was up $50 at $7,660 and aluminium rose $14 to $2,497.
Traders said investors would track events at BHP Billiton's giant
Escondida copper mine in Chile, where a 2-1/2-week strike has cut production
by half at the operation, which produces 8 percent of the world's
copper.
"This isn't a bad thing for BHP Billiton. They have a lot of other
producing mines and their shares are going up on the back of stronger copper
prices," the dealer said.
"A settlement will have a kneejerk reaction and prices will drop, but
speculators may use a sell-off to pick up a few bargains as later this year
there are more pay talks that cover about 20 percent of the world's
production," he said.
Luis Troncoso, president of the 2,052-member union at Escondida, said:
"We are back at step one. At this time there are no talks with the
company...because they said they've given all they are going to give, so the
dialogue was shut off immediately."
On Wednesday BHP Billiton announced a record $10.45 billion profit for
fiscal 2006. The company's shares were little changed at about 1007
pence.
Chip Goodyear, chief executive of BHP Billiton Ltd./Plc., the world's top
miner, said late on Wednesday that demand for goods such as washing machines,
air conditioners and cars in developing nations like China was unlikely to let
up, driving up demand for metals.
Zinc was at $3,395/3,415, up $51.
Zinifex Ltd., the world's second-largest zinc producer, on Thursday
forecast a strong year ahead on further growth in metals prices as global
demand for industrial raw materials, led by China, outran
supply.
© Reuters
2006. All Rights Reserved.