Nickel fell to a two-year low below $19,000 a tonne on Thursday on weakening demand from stainless steel mills, while copper eased on growth fears. Nickel for three-month delivery fell more than 6 percent to $18,749 a tonne, its lowest since June 2006, before recovering slightly to close at $18,800.
On Wednesday it closed at $20,000 a tonne, after falling 2.7 percent on weaker demand from stainless steel producers, which account for about two thirds of global nickel demand. "There has been increasing evidence of weak demand from the stainless steel sector in the third quarter," Calyon analyst Robin Bhar said.
"$20,000 a tonne was viewed as a firm floor for prices. Below here we could see nickel pig iron producers in China cutting production which could be a regulatory mechanism for the market." Stocks of nickel in LME warehouses rose 180 tonnes to 43,368, although they have fallen by about 17 percent over the last three months.
"We will see how long the decline in nickel stocks will last," Simon Toyne, analyst at Numis Securities, said. Stainless steel maker Outokumpu reported a lower-than-expected second-quarter operating profit, hit by softening demand in Europe.
"We are in a seasonal slowdown so I expect some recovery in the fourth quarter, but as you go into next year I am a bit worried given the macro backdrop," Toyne added. Copper for delivery in three months closed at $7,900 a tonne from $8,080 on Wednesday. Earlier it traded at a 6-week low of $7,887 a tonne.
Weaker economic growth has reduced demand for industrial metals, with copper - a key gauge for economic activity - mainly used in the construction and power industries. Rising stocks of copper in LME warehouses, up about 20 percent since the beginning of May, have reinforced selling pressure, traders said.
Aluminium closed at $2,951 a tonne from $3,006, with lower growth predictions from the car industry weighing on sentiment. Elsewhere, tin closed at $22,350 a tonne from $23,100 on Wednesday, zinc eased to $1,860 from $1,925 while lead closed down at $2,170 from $2,214.
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