Nickel shed over seven percent on the London Metal Exchange on Friday as investors took profits ahead of what analysts said would be a more balanced market in the second half of 2007. But tin bucked the falling trend and hit a new high - it touched a peak of $14,345 before ending the session at $14,325/14,350, up $325 from Thursday's close.
The metal was supported on persistent supply concerns in Indonesia, the second largest tin producing country. Steelmaking raw material nickel, which rose to an all-time high of $48,500 per tonne a week ago, ended the session at $42,100, down 7.1 percent from Thursday's close of $45,300.
"There is a general feeling it is overvalued and the price is going to fall," a physical nickel trader said. Two-thirds of all nickel goes to make stainless steel and as the main driver behind the nickel price, which has tripled since the start of 2006, its demand is watched closely.
"We are starting to see signs of the stainless steel market peaking," analyst Jim Lennon at Macquarie Bank said. Last year demand from Chinese stainless steel producers tightened the market and as a result LME nickel stocks in warehouses have dwindled to record low levels.
"But gradually we see the stainless steel market outside China weakening and that should free up a few nickel units," Lennon said, adding that the growth in the Chinese stainless steel industry had led to global overproduction.
"By the middle of the year you will see the (nickel) market getting back into balance and that implies to us that prices should come off," Lennon said. Stocks in LME warehouses rose by 618 tonnes to 4,932, but this level represents only half a day of global consumption.
"At the moment the market is still incredibly tight, the signs of the re-balancing are on the wall, but it is not quite there yet," Lennon said. Chinese nickel producer Jinchaun has an outstanding short position - a bet that prices will fall - of over 2,000 tonnes at the LME, a company source said on Friday. Copper ended lower $10 lower at $6,720 after touching a high of $6,865, supported by an outlook of strong demand from China.
"LME stocks are falling, imports into China are surging, and the macro environment has become more constructive," Man Financial analyst Edward Meir said. Market watchers forecast China would carry on buying large quantities of copper as it industrialises. Aluminium ended at $2,762, down $32 from Thursday's last quote of $2,778/2,780. Zinc lost $40 at $3,155 and lead shed $35 at $1,905.