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Nickel futures closed below record highs and copper also ended over five percent lower as technical selling hit the base metal complex on the London Metal Exchange (LME) on Thursday.
Three months copper for delivery fell by 6.8 percent to an intraday low of $7,180 a tonne after breaking through the important support level of $7,500, traders said.
Gold also fell to an intraday low of $620.9 an ounce, down 1 percent from $627/627.8 in New York on Wednesday.
"We tend to follow gold and gold is under pressure and the problems have been exacerbated as we have moved through technical levels that has prompted further selling," an LME trader said.
Copper closed at $7,290, versus 7,700 on Wednesday, and three months nickel ended down 5 percent at $27,700.
On Wednesday, nickel closed at a record peak of $29,200 as available stocks of metal in LME warehouses fell further, prompting the exchange to intervene overnight for the first time since 1988 on nickel by limiting cash premiums to $300 a day.
"Nickel stocks are at historically low levels and we now have a genuine material shortage. Our first priority is to ensure that trading remains orderly and to prevent the risk of settlement defaults," Simon Heale, LME Chief Executive, said on Wednesday.
The LME's special committee said anyone with a short position in nickel falling due from Friday who was unable to make physical delivery could defer for one day at a penalty of $300 per tonne.
However, nickel prices were expected to remain strong as stocks fell 42 tonnes to 6,120 tonnes on Thursday. Of that, just 1,248 tonnes were available on uncancelled warrants to support the 1.3 million tonne-per-year market.
Dealers said stocks might hit zero. ABN Amro analyst Nick Moore said the value of available nickel in LME warehouses totalled $44 million.
"We have run out of nickel effectively. There is a massive squeeze in place and unless producers can be persuaded to put metal onto the exchange the pricing tension will remain acute," he said.
An LME spokesman said: "In the past stocks have never reached zero. The interaction of supply and demand has ensured that more material flowed into warehouse."
"The market is very messy - verging on the disorderly, but the shorts have gotten off lightly at $300, I would have made them pay $1,000," a fund source said.
The tightness in the supply was also highlighted by the hefty premium for cash metal above three-month contracts of $3,500/$4,000 a tonne.
Dealers said copper price moves would depend on the outcome of talks in Chile to end the strike at the world's largest copper mine.

Copyright Reuters, 2006

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