Copper prices were steady on Thursday, but are expected to fall in coming weeks as the pace of demand growth in China slows and consumption in the United States falls further. Three-month copper on the London Metal Exchange ended at $7,665 a tonne, up from $7,615 at the close on Wednesday. Nickel, mainly used in stainless steel, rose to an intra-day high of $18,900 or 6.2 percent before closing at $18,850, up $1,050.
"The fall in the nickel price has prompted the Chinese stainless steel producers to use primary nickel instead of nickel pig iron," said analyst Max Layton at Macquarie Bank. "And on the supply side you start to see disruptions ... also there has been falls in stainless steel inventories - we think the price will go higher in the short-term," he said.
Prices are down by around 30 percent this year as demand from the stainless steel sector has fallen below expectations, but prospects of tighter future supplies boosted sentiment. Australia's second largest nickel producer, Minara Resources shelved its expansion plans due to high costs and falling nickel prices.
PT International Nickel Indonesia Tbk, one of the world's top nickel producers, also said its revenue and profit fell in the first half of 2008. "The bounce in nickel, if the three-month price pushes through $19,000, could continue towards the $22,000 level at least," said Michael Jansen at J.P. Morgan in a research report.
Price gains could accelerate if stainless steel makers, thinking the market had bottomed, also jumped in to buy the metal, analysts said. Copper, used widely in construction and power, is down about 15 percent since hitting a record high of $8,940 a tonne on July 2. Weighing on prices has been the collapse of the housing market in United States, the world's second largest consumer, and fears that falling imports of copper in China herald a slowdown which will leave an oversupply.
China is the world's top consumer of copper. "There are still considerable demand worries out there and that could pressure copper further," said Daniel Brebner, commodities analyst at UBS. Worries about Chinese demand can be seen in the country's apparent consumption - domestic production plus imports - which at 4.8 percent, according to Reuters calculations, is below expectations of around 10 percent.
In the United States, the number of workers filing new claims for jobless benefits rose 7,000 last week to the highest level in more than six years, government data showed. "The pattern of rising claims replicates earlier increases in 1981, 1991 and 2000 and confirms the economy is now experiencing the fourth recession since 1979," said economist John Kemp at RBS Sempra in a research note.
Aluminium closed at $2,918 a tonne, up from Wednesday's close at $2,906. The energy-intensive metal used in packaging, transport and power hit an all-time high of $3,380 a tonne on July 10. Lead ended at $2,124/2,125 a tonne from $2,065, while zinc was at $1,740 from $1,765 and tin was unchanged at $20,450/20,475 a tonne from Wednesday's last quote.
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