The base metals are up - probably attributable to the news...

The base metals are up - probably attributable to the news below.

If Xstrata suspends its Zinc operations, or any other Zinc producers for that matter - we would see a change in the fundamentals.

Perhaps OZl should make some threatening noises too!

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Xstrata Suspends Nickel Operations After Price Plunge (Update3)

By Alaric Nightingale and Brett Foley

Aug. 19 (Bloomberg) -- Xstrata Plc, the world's fourth- largest nickel refiner, suspended its Falcondo operations in the Dominican Republic after costs surged and metal prices plunged. Nickel advanced as much as 3.6 percent in London trading.

The suspension may last four months, Zug, Switzerland-based Xstrata said today in a statement. The operations produce 29,000 metric tons of nickel a year, equal to about 2 percent of world production of primary nickel.

``The resumption of activities will be assessed based on market conditions, which are expected to improve towards the end of 2008,'' Ian Pearce, chief executive officer of Xstrata Nickel, said in the statement.

Other nickel producers have already cut production or delayed projects. Industrial Metallurgical Holding, Russia's third-largest producer, shut its two nickel plants for 10 days at the end of July for maintenance and is considering reducing output. Minara Resources Ltd., Australia's second-largest producer, also deferred an expansion plan.

Xstrata dropped 34 pence, or 1.2 percent, to 2,789 pence at 8:31 a.m. on the London Stock Exchange. Nickel climbed $550, or 3.1 percent, to $18,600 a ton as of 8:11 a.m. in London. The metal, used in stainless steel, traded at a record $51,800 a ton in May 2007.

Glencore Distribution

Swiss trading company Glencore International AG, Xstrata's largest shareholder and the distributor of its nickel, will liaise with customers about the disruption, Xstrata spokeswoman Claire Divver said by telephone. Falcondo produces ferronickel, a combination of iron and nickel used by stainless steel producers. Xstrata's other nickel operations make a different product, so-called nickel-in-matte, Divver said.

Falcondo, which is 85 percent owned by Xstrata, comprises a mine and treatment plant and employs 1,300 people. Most workers will carry out maintenance during the suspension, Xstrata said. The company plans to use the time to review whether to switch Falcondo's power source to coal from oil.

The operations, which started in 1971, also include a crude-oil refinery and a 200-megawatt power plant. The refinery splits crude oil into naphtha for the furnaces, diesel for transport and fuel oil for the power plant.

Russia's OAO GMK Norilsk Nickel is the world's largest producer of the metal, followed by Brazil's Cia. Vale do Rio Doce and Melbourne-based BHP Billiton Ltd.

Sumitomo Metal Mining Co., the world's seventh-biggest producer, said output hasn't been affected.

``We are operating as normal because the current prices are high enough to be profitable,'' said Hiromasa Ooba, a spokesman at the Tokyo-based company. ``We are also obligated to long-term contracts.''

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