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Nickel Advances in London for a 10th Day as Stockpiles Shrink

July 11 (Bloomberg) -- Nickel gained for a 10th consecutive day in London as stockpiles of the metal that's mostly used to make stainless steel dropped.

Inventories of nickel monitored by the London Metal Exchange fell 486 metric tons, or 5.5 percent, to 8,418 tons today. Stocks have declined 76 percent this year to the lowest since Aug. 23. Credit Suisse Group said last month in a report that nickel demand in 2006 will beat production by 15,000 tons.

``The fundamentals are pretty good, certainly for nickel,'' said Robin Bhar, a London-based analyst at UBS Ltd. ``There's fear that the market doesn't have enough stocks.''

Nickel for delivery in three months on the LME rose $600, or 2.4 percent, to $25,250 a ton as of 11:13 a.m. local time, the highest since at least 1987. The metal has gained 87 percent this year.

Nickel prices gained as strengthening demand, led by surging production of stainless steel in China, exceeds supply, Beijing Antaike Information Development Co., which advises the Chinese government on industry policies, said July 7.

Chinese stainless steel production will rise more than 25 percent to 4.7 million tons this year, boosting demand for nickel by 35,000 tons, or half the projected increase in global demand, Antaike analyst Xu Aidong said in an interview. Global nickel use may rise to 1.33 million tons this year from 1.26 million tons last year, she said.

Copper also rose on the LME, gaining $133 to $7,888 a ton, helped by falling inventories and speculation that global supply may be disrupted by a threatened strike at Escondida, the world's biggest mine for the metal in Chile.

Inventory Drops

The ``lack of inventory is on the bullish side,'' said John Kemp, a London-based analyst at Sempra Metals.

Lead added $30 to $1,110, tin advanced $100 to $8,825, zinc gained $65 to $3,570 and aluminum rose $35 to $2,600.

Alcoa Inc., the world's biggest aluminum maker, said yesterday second-quarter profit surged 62 percent to a record $744 million on higher prices and demand.

Aluminum prices at Alcoa's smelters rose 38 percent on average in the quarter as demand rose from makers of aircraft, building materials and drink cans. Aluminum production rose 1.7 percent to 882,000 tons from the first quarter as Alcoa's expanded Alumar smelter in Sao Luis, Brazil, started production in March. The smelter will boost output by about 50,000 metric tons this year, Alcoa has said.

Alcoa is also investing in smelters outside the U.S., including in Iceland, because Chief Executive Officer Alain Belda expects worldwide aluminum demand to double by 2020. By then,

``China continues to be short,'' said Belda. ``They will be short aluminum and alumina for the year, and I think it will be in that condition through 2006, 2007, probably 2008, also.''

The average price of aluminum on the LME rose 50 percent from a year earlier and reached a 19-year high of $3,310 a ton in May.

To contact the reporter on this story:
Katy Watson in London at [email protected]
Last Updated: July 11, 2006 06:16 EDT