cvrd workers strike

Nickel Gains After Strike Fuels Concern Demand Will Beat Supply

By Chanyaporn Chanjaroen and Brett Foley

April 2 (Bloomberg) -- Nickel rose to a one-week high after a strike at a Canadian mine that accounts for 4 percent of world production stoked speculation that stockpiles won't meet global demand for the metal.

The strike by Cia. Vale do Rio Doce workers began yesterday at the Sudbury unit in Ontario before a tentative agreement was reached overnight. The walkout will continue until the deal is approved tonight. Rising demand for the metal in China has cut inventories monitored by the London Metal Exchange by 84 percent in the past year and prices more than doubled.

``This market is so finely balanced at the moment that even a strike by office workers can fuel the market,'' Alex Heath, who heads the base-metals trading team at RBC Capital Markets in London, said today by phone.

Nickel for delivery in three months on the London Metal Exchange rose $800, or 1.8 percent, to $45,600 a metric ton as of 6:28 p.m. local time. The metal has almost tripled in the past year.

Vale and 330 workers, including office staff, surveyors and laboratory employees represented by the United Steelworkers of America, have agreed on a new contract, Wayne Fraser, director of the Ontario division of the union said, said today. Sudbury nickel operations are running ``normally,'' said Vale spokesman Cory McPhee in Toronto.

Inventories

Inventories monitored by the LME dropped 3.4 percent to 5,233 tons, the exchange said today in a daily report. Nickel demand in China, the world's largest user of the metal, will grow 29 percent this year to 320,000 tons as its stainless-steel industry expands, Macquarie Bank Ltd. said today in a report.

Stockpiles of the metal, which are below two days of global consumption, are ``the biggest issue,'' said William Adams, an analyst at London-based metals Basemetals.com. Adams worked for LME member Rudolf Wolff & Co. for 10 years until 2000, when the company was sold to Enron Corp.

Acerinox SA, the world's fourth-largest stainless-steel producer by 2005 output, said today that sustained high nickel prices may curb demand for the company's products.

``Some sectors, such as appliances and cutlery, are affected by high nickel prices more than others,'' spokesman Juan Garcia said in a telephone interview from Madrid. ``The end user must pay that cost and we feel they will be reluctant to accept higher and higher prices for stainless steel.''

Copper Gains

Copper rose after Xstrata Plc, the world's fourth-largest producer, said prices may rise the next few years. Demand for China may increase 8 percent to 10 percent this year compared with 2006, Charlie Sartain, chief executive officer for copper at Xstrata, said in an interview in Manila.

``We do see, across all commodities, phenomenal growth,'' he said. Copper climbed $120, or 1.8 percent, to $6,980 a ton at 6:47 p.m. in London.

The metal, used in wires and pipes, gained 8.4 percent in the three months March 31, the most in the past three quarters.

Earlier, copper fell as much as 0.8 percent. An industry report showed that manufacturing growth in the U.S. slowed last month and an index of costs rose to the highest since August as weakness in auto demand and a slump in housing restrained production. The U.S. is the world's second-largest user of the metal, after China.

The Institute for Supply Management's manufacturing index fell to 50.9 from 52.3 in February. Readings of more than 50 signal expansion. An index of prices paid jumped to 65.5, the highest since August, from 59.

Also on the LME, aluminum fell $23 to $2,757 a ton and zinc dropped $95, or 2.9 percent, to $3,160 a ton. Lead increased $5 to $1,925 a ton and tin was unchanged at $13,400 a ton.

To contact the reporter on this story: Chanyaporn Chanjaroen in London at [email protected] ; Brett Foley in London at