Nickel Slumps to Lowest Since 2003 as Metals Rout Resumes

Updated on
  • At least half global production now loss-making, says PT Vale
  • Aluminum in Shanghai also forges fresh low on shorts

Nickel tumbled to the lowest level in more than a decade as stainless-steel output in China slows amid forecasts for the weakest economic growth in a generation. Aluminum in Shanghai also forged a new low.

Nickel dropped as much as 1.7 percent to $8,800.00 a metric ton on Friday, the lowest since July 2003, before trading at $8,840 at 9:58 a.m. in Hong Kong. Nickel is the worst performing metal on the London Metal Exchange this year, plunging 42 percent, and is set for the biggest annual decline since the global financial crisis.

The metal’s slump is so severe that at least half global production is now loss-making, according to PT Vale Indonesia, which forecasts that there will probably be a wave of closures across the industry to curtail output.

A slowdown in China has pummeled commodities, sending the Bloomberg gauge of 22 raw materials to the lowest since 1999 this week. After nickel reached a record $51,800 in May 2007 as supply couldn’t match demand from China, prices have fallen as slower growth damped demand and the country boosted nickel pig iron output, an alternative to the refined metal. Nickel supply will exceed demand by 26,000 tons this year as China falters, Sumitomo Metal Mining Co. forecasts.

Aluminum on the Shanghai Futures Exchange slumped to its lowest since at least 2004, while LME copper fell 0.7 percent to $4,598 and is headed for its sixth weekly loss.

Aluminum in China has been hit after traders built up big short positions in the metal due to its heavily oversupply on world markets. The metal slumped as much as 1.8 percent to 9,640 yuan a metric ton, before recovering to trade little changed.

Daily volumes and open interest on the SHFE’s aluminum contract have surged in recent months as investors bet on lower prices. “Prices have meanwhile tumbled signifying large new shorts were put on,” according to ICBC Standard Bank Plc analysts in a note from Nov. 19.