Nickel prices slid to their lowest level in over a year on Thursday, as supply remained robust despite an Indonesian ban on ore exports, while a drop in oil weighed on some other base metals. Some analysts and investors have been waiting for shortages to kick in after Indonesia imposed a ban last year, but higher-than-expected supply from the Philippines has helped fill the gap.
Three-month nickel prices on the London Metal Exchange dropped to a session low of $13,910 a tonne, the weakest since February 6, 2014, and pared losses to close at $13,975, down 2 percent. LME nickel inventories have increased by 31 percent over the past six months, while fresh data this week also provided more evidence of robust supplies. The World Bureau of Metal Statistics said the global nickel market showed a surplus of 197,000 tonnes last year.
"Many participants were expecting a balance or a small deficit in the nickel market in 2014, but the data actually showed a surplus. That might have weighed on sentiment," said Xiao Fu, head of commodity market strategy at Bank of China International in London. Weighing on other metals was a tumble in oil prices, after another big weekly build-up in US crude inventories and a possible rise in Saudi output stoked worries about oversupply.
"Oil is continuing to have some influence; the volatility is here to stay in the oil market and can have some spill-over impact into metals," Fu added. LME copper closed 0.1 percent higher at $5,750 a tonne, after a 1.7 percent gain in the previous session, with trade throughout the metals markets subdued as many Asian nations celebrate Lunar New Year.
Copper prices hit 5-1/2 year lows in January as inventories held by exchanges shot higher while slack seasonal demand and China's slowing economic growth constrained industrial activity. A recovery in recent weeks has failed to gain much traction. "You've had stocks rising, merchant premium pretty weak, the vast majority of demand signals are weakish," said analyst Daniel Morgan of UBS in Sydney.
"But once you come back after Chinese New Year, that's when activity roars to life. I don't think I would like to be short." China's stock, bond, foreign exchange and commodity futures markets are closed until February 24 for the Lunar New Year holiday. Aluminium dipped 0.1 percent to $1,818, zinc fell 0.5 percent to $2,077, lead dropped 0.8 percent to $1,799 and tin was up 0.5 percent at $18,175.