nickel rises to 14-year high

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    Nickel Rises to 14-Year High in London With Demand Seen Higher

    Oct. 14 (Bloomberg) -- Nickel rose to its highest in more than 14 years in London as gains in demand outpaced new supplies, prompting its biggest producer to pledge supplies from stockpiles to lower prices into a range that won't hurt demand.

    OAO GMK Norilsk Nickel's head of marketing, Viktor Sprogis, yesterday said the Russian miner had plenty of ``ammunition'' from stockpiles to keep the market supplied. It's boosting sales by a third this year to supply China, which now accounts for a fifth of demand. Norilsk produces a fifth of the world's nickel.

    ``Gifted with strong demand, constrained supply and low stocks, nickel has the strongest fundamentals of all the base metals,'' Martin Fewings, a metals analyst at Mitsui Bussan Commodities Ltd. in London, told the London Metal Exchange's 2003 seminar. ``Strong demand from China is all but certain and another year of double-digit growth is in prospect.''

    Nickel for delivery in three months rose $190, or 1.7 percent, and was bid at $11,460 a ton in electronic trading on the LME as of 7:20 a.m. That's its highest compared with closing prices since September 1989.

    Nickel has gained 58 percent this year, outperforming every other metal traded on the LME. Metal for immediate delivery should average $10,150 a ton in 2004, Fewings said.

    A more ``reasonable'' price would from $6,000 to $8,000 a ton, Sprogis told journalists in London. Norilsk is concerned that a surge in prices will hurt demand and encourage customers to use more manganese in stainless steel instead of nickel, or use aluminum instead of stainless steel.

    A three-month strike at Inco Ltd.'s Canadian mines also pushed up prices. Inco is the world's second-largest nickel producer.

    Copper Rises

    Among other metals for delivery in three months, copper was $30.5, or 1.6 percent, higher at $1,964 a ton. That's its highest compared with closing prices since October 2000. Copper, used in everything from wires to pipes, has gained 24 percent this year, its best performance since 1999.

    Hedge funds and other large speculators held a net 40,164 contracts in the week ended Oct. 7, up from 33,996 the previous week, on the Comex division of the New York Mercantile Exchange, according to a report from the U.S. Commodity Futures Trading Commission. That's the biggest gain in contracts since July.

    ``We believe the copper market is moving into deficit on a full-year basis this year and next,'' Ingrid Sternby, an analyst at Barclays Capital, told the LME seminar. ``We see prices about 10 percent higher on an average basis this year compared with last, and stronger prices at a similar pace next year.''

    Copper futures in New York yesterday had their biggest gain since February, extending a 33-month high, on speculation that U.S. manufacturers will use more of the metal as the world's largest economy strengthens.

    Aluminum Gains

    Aluminum for delivery in three months was $1.50 higher and bid at $1,501 a ton in London. That's its highest compared with closing prices since June 2001. The metal used in drinks cans, cars and airplanes has gained 11 percent this year, the worst- performing metal on the LME.

    ``The outlook for 2004 appears to be moderately positive,'' Robin Bhar, a metals analyst at Standard Bank in London, told the LME seminar. ``A strong upturn in demand is expected to move the market much closer to balance in 2004, although we remain concerned about potential smelter production growth.''

    Zinc for delivery in three months rose $7, or 0.8 percent, to $936 a ton, its highest compared with closing prices since May 2001. The metal used in batteries and car bodies has gained 21 percent this year.

    Zinc demand will rise 1.7 percent this year and 3.5 percent in 2004, according to the London-based International Lead and Zinc Study Group. Mining output will grow 3.7 percent this year and 3.1 percent next year. That will leave a surplus of 100,000 tons this year before the market becomes balanced in 2004.

    Lead for delivery in three months was $2 higher at $607 a ton, while tin rose $15 to $5,320 a ton.

    ``Over the year ahead, there is every indication that (tin) prices will trend even higher,'' said Mitsui's Fewings.

    Last Updated: October 14, 2003 03:00 EDT
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