On the Shanghai Futures Exchange where prices have trended lower since late December, copper stayed down by 0.3 percent at 53040 yuan ($8,425) a tonne on Monday. Shfe nickel was down 2 percent. "Aside from the strengthening dollar, we think concerns about China's weak demand (have) also weighed on the nickel price," said broker Argonaut Securities in a report.
Some of China's stainless steel mills, the major consumers of nickel, are losing money at current prices and have already wound down their operations, it said. "Looking into February, a week long Chinese Lunar New Year will further dampen production and demand. More steel plants are expected to arrange care and maintenance therefore production of stainless steel is expected to contract further," it said.
"We expect to see price weakness in nickel going forward." Higher supply overhung the market after Peru, the world's No. 2 copper and zinc producer, reported a substantial rise in production. Copper production grew 3.9 percent to 2.4 million tonnes and zinc production surged by 10.2 percent to 1.5 million tonnes.
Russian aluminium maker Rusal said on estimated that China's winter capacity cuts will curb output by 1 million tonnes annually. Hedge funds and money managers cut their net long position in COMEX copper in the week to January 30, US Commodity Futures Trading Commission (CFTC) data showed.