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Nickel Gains on Australian Mine Closure; Lead at Three-Year Low
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By Claudia Carpenter

Dec. 19 (Bloomberg) -- Nickel gained the most in a week in London as Oz Minerals Ltd. shut its Avebury mine in Australia. Lead fell to a three-year low and copper slid to the lowest in four years.

The site in Tasmania accounts for 8,000 metric tons of nickel mine output a year, according to Michael Widmer of BNP Paribas SA in London. Nickel has dropped 63 percent this year.

“All of these things have a bit of a knee-jerk reaction,” said Alex Heath, head of industrial metals trading at RBC Capital Markets in London. “The 64,000 dollar question is how much more production has to be cut before it has a lasting impact on the price because stocks are still building.”

Nickel for delivery in three months advanced $150, or 1.5 percent, to $9,925 a ton as 12:35 p.m. on the London Metal Exchange, after earlier climbing 6.9 percent. Copper fell as much as $29.85 to $2,850.15, the lowest since Nov. 2, 2004, and lead dropped to $900, the lowest since Sept. 21, 2005.

Inventories of nickel used to make stainless steel have increased 55 percent this year to 74,244 tons, the highest since July 28, 1995, warehouse figures from the LME show. Global output exceeded demand by 15,400 tons in October, double the surplus of a year earlier, the Lisbon-based International Nickel Study Group said yesterday.

Oz Minerals won’t consider reopening Avebury until nickel returns to $7.50 a pound ($16,535 a ton), Chief Executive Officer Andrew Michelmore told reporters.

Caught Out

Few nickel producers hedged against a drop in prices, Heath said. Aluminum and zinc producers that did hedge against lower prices have been buying back those contracts, adding to demand, he said.

Aluminum has dropped 38 percent this year and zinc is down 53 percent as inventories of both metals more than doubled this year. Investors may even start being interested in aluminum if prices fall below $1,400, he said.

Aluminum declined $10 to $1,484 a ton and zinc gained $5 to $1,110 a ton. Tin rose $20 to $10,725 a ton.

For this year, lead is down 65 percent, tin 35 percent and copper 57 percent.

To contact the reporter on this story: Claudia Carpenter in London at [email protected] or [email protected]

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