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Nickel Advances in London on Falling Stockpiles, Supply Delays

By Brett Foley

Jan. 15 (Bloomberg) -- Nickel rose on the London Metal Exchange on speculation dwindling stockpiles and supply disruptions will create a shortage of the metal.

Inventories tracked by the LME fell by 240 tons to 5,676 tons, the exchange said in a daily report today. LME-monitored stockpiles have slid 82 percent in the past 12 months while delays to nickel projects proposed by BHP Billiton Ltd. and Cia. Vale do Rio Doce, the world's largest and second-largest mining companies respectively, have exacerbated shortages.

``Those supply concerns will remain this year and into 2008,'' said Roy Carson, a London-based analyst at Triland Metals Ltd, one of 11 companies authorized to trade on the LME's floor. ``How much that continues to affect the price will depend on demand.''

Nickel for delivery in three months on the LME increased $605, or 1.9 percent, to $33,050 a metric ton as of 9:20 a.m. in London. The metal dropped 3.2 percent at the end of last week. Nickel, which is used in stainless steel, more than doubled last year and traded at a record $34,950 on Dec. 15.

BHP said on Nov. 30 that its Ravensthorpe nickel project in Australia would be delayed by as much as a year as costs increased 64 percent. Vale was ordered by a French court on Nov. 24 to stop construction at its $2.15 billion Goro mine on the Pacific island of New Caledonia until it received administrative licenses. Vale acquired Goro when it gained control of Canadian miner Inco Ltd. last year.

Deutsche Bank AG, Europe's biggest securities firm, raised its price forecasts for nickel, used in stainless steel, by 62 percent for 2007 to $14.28 a pound, and by 110 percent for 2008 to $14.06 a pound. Spot nickel prices averaged $10.96 a pound in London last year. The bank also increased its 2006 zinc forecast by 6.7 percent to $1.67 a pound.

Rising demand from Chinese stainless-steel makers and delays to the nickel projects of Vale and BHP means there will be a nickel deficit until 2009, the bank said in a Jan. 12 report.

Copper fell $55 on the LME to $5,694 a ton. LME-tracked inventories of the metal gained for a fifth day to 2,600 tons to 199,450 tons. Aluminum gained $11 to $2,706 and zinc increased $20 to to $3,790.

To contact the reporter on this story: Brett Foley at [email protected] .

Last Updated: January 15, 2007 04:46 EST