Industrial metal nickel fell over 5 percent on the London Metal Exchange on Tuesday as investors worried about slowing demand for stainless steel, its main consuming market. Nickel for delivery in three months touched a low of $22,800 per tonne, down 5.4 percent, before narrowing losses to close at $23,300, down $800 from Friday's close.
Last Friday it hit a two-year low of $22,350, and prices are down over 10 percent since the start of the year and they are less than half since May last year. Investors sold the metal on the basis that demand growth for stainless steel may falter if the overall economic outlook worsens.
"The market had a collective change in sentiment about a week ago, and this is a continuation of that," Merrill Lynch analyst Daniel Hynes said. "It's going to remain fairly tough for nickel."
The move lower, despite an overall stronger market, showed just how vulnerable nickel still is, analysts said. "We really do not see any support on the longer-term charts until much lower levels," said analyst Edward Meir at MF Global in a report.
Among other metals copper, an increasingly popular alternative investment and a key gauge of underlying economic activity, was up $10 at $8,190 per tonne. In the copper market analysts worried about the absence of Chinese restocking, but at the same time looming supply disruptions supported prices with possible strikes in Latin America and concerns about energy shortages in various parts of the world.
Copper found support at $8,050 per tonne, while upside resistance was at $8,420, Meir said. "We do not see much of a case to make for copper either way at this stage; the upside is capped by concerns about flagging demand, while supply issues are contributing a measure of support on the downside," he said.
LME aluminium slipped $5 to $2,996 per tonne, with concerns that higher energy prices could derail smelter expansion plans underpinning prices. Norwegian aluminium group Norsk Hydro said on Monday that aluminium markets were stronger than expected and prices were more likely to rise than fall.
Chief Executive Eivind Reiten said in an interview that strong Chinese demand more than offset effects of a weak US economy, and saw global aluminium demand up 8-9 percent in 2008.
Western world unwrought aluminium stocks fell to 1.569 million tonnes at the end of April, compared with a 1.607 million in March, provisional International Aluminium Institute (IAI) figures showed.Zinc was up $6 at a quoted $2,151 per tonne, lead was up $41 at $2,050 and tin was up $450 at $24,200 per tonne.