Nickel hits fresh 27-month peak; copper down on China data

Bareksa.com - Nickel touched a fresh 27-month high on Tuesday while copper dipped after Chinese data pointed to weak economic activity in the world's biggest metals consumer.

Nickel see-sawed from negative to positive territory as traders sought to second-guess the volatile market.

At Tuesday's peak, nickel had gained 17 percent in just four sessions and 55 percent so far this year following a ban in January on unprocessed ore exports from top producer Indonesia.

"After huge gains like this, it's not surprising at some point to see flip-flopping. The question is whether this is a signal for it to have a more serious correction," said Stephen Briggs, metals strategist at Societe Generale in London.

"It's very hard to call because I don't think it would be based on the fundamentals, but just the internal dynamics of the market - who's positioned and do they have to get out of the positions."

Three-month nickel on the London Metal Exchange dropped as much as 1.7 percent to a session low of $20,550 a tonne after surging to a high of $21,625 a tonne, its strongest since February 2012.

It closed up 0.48 percent for the day at $21,000 a tonne.

LME open interest in nickel <MNI-OI-TOT> has jumped 72 percent this year to a record high as hedge funds and other investors have piled in to capture the market impact of expected shortages after the Indonesian ore ban.

"Such is the momentum behind this uptrend that many potential sellers are standing aside in anticipation of selling at higher levels," broker Triland said in a report.

The price of nickel ore from the Philippines has more than doubled since late February as supplies have dried up from Indonesia, previously the world's biggest exporter.

While most analysts forecast severe nickel shortages in the future, some are concerned about the extent of the price gains before there is an actual market deficit.

LME nickel inventories <MNISTX-TOTAL> have barely declined from record levels and rose on Tuesday by 222 tonnes to 278,994 tonnes, up 56 percent over the past 12 months.

In another sign that nickel supplies were still available, Pacific Metals Co Ltd, Japan's biggest ferronickel maker, said it had secured enough supplies of nickel ore for the year through March 2015.

CHINESE DATA

Copper and aluminium came under pressure after disappointing data on Chinese investment, retail sales and factory output, which suggested the world's second-largest economy was losing steam despite government efforts to shore up activity.

LME copper closed down 0.49 percent to $6,845 a tonne after touching a two-month high of $6,895 on Monday, when it advanced 2 percent.

"The market is clearly not pricing in a hard landing for China. Otherwise prices would be a lot lower, but the data overnight brings us back to the reality that growth is slowing," Briggs said.

The decline was modest as copper was supported by signals of tight local supply.

"The copper market is tight inside and outside China," Joel Crane, an analyst at Morgan Stanley in Melbourne, said.

"Inventories are falling; we are in the midst of peak Chinese demand season; Chinese producers are going to export less; scrap availability is low ... there are a lot of things acting to improve its fundamental picture."

Before the Chinese data, the most-traded August copper contract on the Shanghai Futures Exchange jumped as much as 2.1 percent to 48,580 yuan ($7,800) a tonne. They were trading at 48,170 yuan ($7,700), still up 1.2 percent on the day.

Traders said short-covering fuelled the gains in China copper contracts. Prices have also been supported as financiers have used copper as collateral to secure more favourable lending terms, locking its huge imports away from consumers.

Aluminium ended down 0.28 percent at $1,781 a tonne, zinc closed down 0.82 percent at $2,063 a tonne and lead ended down 0.16 percent to $2,122 a tonne.

Tin closed at $23,335 a tonne, up 1.57 percent. (Source : Reuters)