By Andrea Hotter
Of Dow Jones Newswires
LONDON (Dow Jones)--A relatively quiet morning session for London Metal
Exchange base metals Monday, with nickel defying broker expectations of a slide
lower amid a decline in stocks and bullish news concerning CVRD's Goro project.
Despite a 30 metric tons fall in LME stocks and a rise in canceled warrants,
brokers said nickel is looking increasingly vulnerable to a technically-driven
selloff that could trigger a pullback in the other metals.
As of 1045 GMT, LME nickel was trading at $42,700/ton, up 3% on the day but
down 8% from Friday's high.
Some positive news for the market came from unconfirmed reports by sources
close to CVRD that its Goro project won't start production until 2011 and will
likely not ramp up to full capacity for a further three to four years.
CVRD is currently reviewing the 60,000 ton nickel mine which is due to start
production in 2009.
A drop in stocks helped LME nickel, although this is expected to be
short-lived. At 4,902 tons, LME nickel stocks are under one days' global
consumption, but they rose around 25% last week and there is a growing
expectation among industry players that further rises could come.
Producers have finally started to express dissatisfaction with the record
pricehighs seen in recent days, with demand destruction the main concern.
Producers of steel use nickel as the key raw ingredient and they've already
started to substitute away from the metal due to increasing cost.
Last week, China's Jinchuan Group Ltd. said nickel prices are becoming
distorted by speculative and investment fund activity. Although the company has
said it has a nickel short position which it has been delivering against, this
is natural given the requirements of Chinese accounting. As a major nickel
producer, a short position would be covered by its own output.
Commercials and macro investors are starting to sell the forward dates, likely
based on the medium term outlook for lower prices, analyst Michael Jansen of
JPMorgan said. But this means that any further rallies in nearby nickel "would
be built on shaky foundations," he added.
The other base metals were relatively quiet by comparison with no fresh
fundamental news and stable currency market conditions keeping volatility to a
minimum, brokers said.
LME tin continues to draw support from supply concerns in Indonesia, pushing to
$14,400/ton in illiquid conditions.
Expectations of renewed Chinese demand is meanwhile supportive of LME copper,
with falling stocks boosting the market around 1% to $6,800/ton.
LME zinc, aluminum and lead held in recent ranges with little activity seen.
-By Andrea Hotter, Dow Jones Newswires; +44 (0)20 7842 9413; [EMAIL PROTECTED]
(END) Dow Jones Newswires
March 26, 2007 06:02 ET (10:02 GMT)
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