Nickel Rises to Record for Third Consecutive Day in London By...

Nickel Rises to Record for Third Consecutive Day in London

By Chanyaporn Chanjaroen and Brett Foley

March 14 (Bloomberg) -- Nickel rose to a record for a third consecutive day as dwindling stockpiles fueled speculation shortages of the metal used in stainless steel will worsen this year.

Inventories monitored by the London Metal Exchange fell for a second day, by 60 metric tons to 3,816 tons, the exchange said in a daily report. That's less than two days of global consumption. Stockpiles have slumped 43 percent this year.

The market is in ``fear mode'' as suppliers compete for nickel to maintain production, Michael Jansen, a London-based metals analyst with JPMorgan Securities Ltd., said via phone. ``Producers need the material and they are prepared to pay up to get it.''

Nickel for delivery in three months gained $1,200, or 2.8 percent, to $44,800 a metric ton as of 4:16 p.m. local time. Earlier, the contract earlier rose to $45,000 a ton, beating yesterday's record by $250.

Nickel has more than doubled in the past 12 months, fueled by expanding demand in China, encouraging miners to develop new projects and stainless-steel makers to substitute the metal with cheaper raw materials and use stockpiles, BNP Paribas said on March 12. Nickel demand will beat supply by 11,000 tons this year, Standard Bank said in a March 7 report.

PT International Nickel Indonesia, the country's biggest nickel miner, said today it is considering building a $500 million mine and processing plant in Indonesia's Central Sulawesi province by 2010 to help meet the soaring demand.

`Finding the Floor'

Copper gained, reversing earlier losses, after stockpiles of copper monitored by the LME dropped 1,975 tons, or 1 percent, to 197,750 tons. That's the lowest since Jan. 23. Copper on the LME rose $30, or 0.5 percent, to $6,250 a ton.

Earlier falls were due to ``external factors'' including declines in global stock markets that have nothing to do with commodity demand and supply, Tariq Salaria, an analyst at Standard Chartered Plc in London, said in an interview.

``Base metals have found their floor,'' Salaria said. ``It's just the environment isn't so supportive.''

U.S. subprime mortgage delinquencies rose to a four-year high in the fourth quarter, a report from the Mortgage Bankers Association showed in late yesterday. That may hurt U.S. housing construction and manufacturing, whose growth correlates with metals usage, said David Thurtell, an analyst at BNP Paribas in London. The U.S. is the second-largest user of copper and aluminum after China.

``The demand side in the U.S. is going to slow further in 2007,'' Thurtell said in a telephone interview. ``That's going to spread to Europe.''

Copper, used in plumbing and cables, has slumped 28 percent since trading at a record $8,800 on May 11. Industrial metals may drop 10 percent in the next few months, Thurtell said.

Mining Shares

Declines in metals prices dragged down mining stocks. BHP Billiton Ltd., the world's largest miner, dropped as much as 3.2 percent to 992 pence in London. Xstrata Plc, the world's fourth- largest copper and nickel producer, slid as much as 4.3 percent to 2,264 pence.

Lead gained as Western Australia's Esperance port remained closed to exports of the metal from Ivernia Inc.'s Magellan mine for at least another week, the local port authority said today. Tests are being conducted to determine the source of lead killing birds in the region. Lead exports from the port were suspended March 12. The company planned to ship around 84,000 tons of lead in concentrate from the port to its Chinese customers this year. Lead increased $30, or 1.6 percent, to $1,880.

Also on the LME, aluminum fell $7 to $2,730 a ton, tin gained $50 to $13,650 and zinc increased $6 to $3,226.

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