Nickel Declines Amid Speculation Price Gains May Temper Demand

May 20, 2014 3:32 am ET

May 20 (Bloomberg) -- Nickel dropped for the first time in three days amid speculation that the rally in prices this year may curb demand for the metal used to make stainless steel.

The contract for delivery in three months on the London Metal Exchange retreated as much as 3.3 percent, erasing an earlier 2 percent gain. It was 1.5 percent lower at $19,794 a metric ton at 4:09 p.m. in Tokyo. The metal jumped 5.7 percent yesterday, the biggest advance since Sept. 14, 2012.

Nickel reached $21,625 on May 13, the highest level since February 2012 and has advanced 42 percent this year, making it the best performer on the LME.

“With speculative interest focusing on nickel, the market is so volatile,” said Hwang Il Doo, a senior metals trader at Korea Exchange Bank Futures Co. in Seoul. “Without a change in fundamentals, any dip offers the chance for bargain hunting.”

The global surplus will drop to a four-year low this year and the market will swing to a deficit next year, OAO GMK Norilsk Nickel, the world’s largest producer of the refined metal, said yesterday.

Demand for nickel will exceed output through 2019 as consumers seek to replace supplies from Indonesia after the government barred exports of raw ore in January, Macquarie Group Ltd. said last week.

Copper in London rose 0.2 percent to $6,937 a ton after touching $6,954 yesterday, the highest price since March 7. Stockpiles monitored by the LME have slumped 50 percent this year to 183,050 tons, the lowest since September 2008.

The metal for delivery in July on the Comex in New York was little changed at $3.1655 a pound. In Shanghai, futures for delivery in August lost 0.3 percent to close at 48,810 yuan ($7,825) a ton.

On the LME, tin, zinc, aluminum and lead climbed.