nickel

Nickel to find support at $43,000

Good buying for agm in the comming days.

DJ LME Nickel Falls To 2-Mo Low; Chance For Good Buys -Analysts
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06/07/2007 09:30:10 AM EDT
DowJones

LONDON, Jun 07, 2007 (Dow Jones Commodities News via Comtex) -- By Lisa Yuriko Thomas

Of DOW JONES NEWSWIRES

London Metal Exchange nickel dropped to a two-month low on short and technical-related selling Thursday triggered by the LME's change in nickel lending rules, but the lower price levels should be seen as a good buying opportunity, said market analysts and participants.

LME nickel extends earlier losses on short-selling triggered by changes to the LME lending guidance, said William Adams of BaseMetals.com. A drop through the 100-day moving average of $43,825 a metric ton also triggered technical selling, Adams said.

Three-month nickel traded to a low of $43,402/ton, down 4% from Wednesday and off 15% from a recent record high of $51,800/ton touched on May 9.

"This is a long overdue correction," Adams noted. But the next level of support for nickel is between $43,000/ton and $43,500/ton, said J.P. Morgan analyst Michael Jansen.

News that the LME amended its lending guidance on dominant long positions for its nickel contract from Thursday, lowering the threshold from where members or clients that hold long positions are required to lend to the market, triggered the price fall.

The lending guidance is a measure to prevent trading from becoming disorderly when one or more market participants have a dominant long position in the market.

Nickel has reacted negatively as expected to the changes in the LME lending rules, noted UBS analyst Robin Bar, because it effectively frees up more metal to the market. "The nearby spreads have come under pressure and this has put pressure on outright prices," he said.

Nickel's weakness triggered falls in other base metals as well, with copper falling 0.5% from Wednesday while zinc fell some 1.2% from Wednesday.

Adding to nickel price pressure, LME inventory data showed a rise of 198 tons to 8,604 tons Thursday, with rumors circulating the market of a large rise in nickel stocks expected over the next couple of days.

Increasing concern over the erosion of demandin the stainless steel industry - the largest consumer of nickel - has also soured positive sentiment over the past few months. Stainless steel producers, particularly those in Asia, have been at the forefront of efforts to find cheaper substitutes for nickel, analysts said.

And while nickel stocks have been critically low for some time, at just over two days of annual consumption, stocks have nearly doubled over the past three weeks.

However, despite the price fall, analysts said the lower price levels should be well supported as a good buying opportunity for investors.

A shortage of the metal still exists which should provide the impetus for further buying, said Adams.

At 1300 GMT, nickel traded at $43,800/ton, down 3.7% from Wednesday.

The sky is not falling as manure would have you believe.

dewy