Nickel hit a two-year low on Friday as worries about demand from stainless steel mills mounted, while copper was seen coming under pressure from fears of global economic slowdown. Three-month nickel on the London Metal Exchange touched $18,250 a tonne, the lowest since June 2006. It ended at $18,450 from $18,800 at the close on Thursday.
The metal has fallen by nearly 50 percent since early March. "It is no wonder that prices have fallen with demand being so weak, stainless steel consumers are betting the price will fall further and therefore delaying buying," said Leon Westgate, analyst at Standard Bank.
Nickel fell 6 percent on Thursday after stainless steel producer Outokumpu said it expected delivery volumes in the third quarter to fall and expressed concern over the outlook for next year on the softening macroeconomic picture. However, some analysts said prices had fallen too far and that low stocks could help nickel regain $20,000 a tonne.
Stocks of nickel in LME warehouses at around 43,000 tonnes, are down around 17 percent since the middle of April. "We expect nickel to return to the $20,000 to $25,000 a tonne range soon, which is fundamentally justified in our view," said Eugen Weinberg, analyst at Commerzbank. Supporting industrial metals on Friday was a softer dollar, which makes commodities priced in dollars cheaper for holders of other currencies.
An unexpected rise in US durable goods data for June gave a brief boost to copper - seen as a gauge of economic growth and used in construction and power. "Durable goods was a good number, but its a very volatile indicator," said Edward Meir, analyst at MF Global. "The weaker dollar today is a support for copper ... But metals look vulnerable, there is more to go on the downside."
Meir cited worries about global economic growth as a reason for his bearish view. However, a dominant holding of copper stocks and cash material is helping nearby prices. The premium or backwardation for cash material over the three-month contract is up at around $230 a tonne compared with below $220 earlier this week.
Copper closed at $7,956 from $7,900 on Thursday and aluminium at $2,970 from $2,951. For aluminium, used in packaging, power and transport, selling pressure was also reinforced by expectations of an oversupplied market this year. "We see quite a strong ramp up of aluminium production in China from new smelters with captive power," said Jim Lennon, analyst at Macquarie Bank.
China is the world's top producer and consumer of the energy-intensive metal used in packaging, transport and power. Analysts estimate the country could be producing 15 million tonnes of the metal by the end of this year, out of a total of 40 million tonnes. Tin was last bid at $22,300 from $22,350, zinc ended at $1,845 from $1,860 and lead at $2,115 from $2,170 at the close on Thursday.
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