Glencore Drags Down Mining Shares as Nickel Drops to 6-Week Low

Updated on
  • Glencore shares paring gains after stock doubled this year
  • ‘Little impetus’ for nickel to be at $11,000 a ton: Melek says

Mining shares retreated, dragged down by a second day of losses in Glencore Plc after the commodities trader and miner reported the smallest profit since becoming publicly traded. Nickel fell to a six-week low.

Glencore fell as much as 4.9 percent a day after the company reported a 66 percent plunge in first-half profit on weak raw-material prices. Nickel is also retreating after rallying as much as 25 percent this year as doubts about Chinese demand and high stockpiles of the metal damped the outlook for the market.

“Until we can show demand is about to surge, there’s no reason to think the current inventories that are quite hefty are going to come down in a material way,” Bart Melek, the head of commodity strategy at TD Securities in Toronto, said in a telephone interview. “Until that happens, there’s little impetus to think nickel has reason to be around $11,000.”

Nickel for delivery in three months fell 1.5 percent to settle at $9,845 a metric ton at 5:50 p.m. on the London Metal Exchange, after touching $9,810, the lowest since July 11. The metal is down 4.9 percent this week, poised for the biggest drop since March.

Glencore shares pulled back after the stock doubled this year on evidence that management is cutting debt, selling assets and helping the company weather this period of weak raw material prices.

There’s also concern about the outlook for iron ore, Ben Davis, an analyst at Liberum Capital Ltd. in London, said by phone. Steel production in China, the world’s biggest supplier, will probably contract this year and shrink further in 2017 as local demand slows, hurting prospects for the metal, according to Li Xinchuang, a vice chairman at the China Iron & Steel Association. Citigroup Inc. to UBS Group AG have also said that prices are set to ease.

In other metals news:

  • Copper for delivery in three months slid for a fifth straight session, falling 0.1 percent to $4,626 a ton ($2.10 a pound) on the LME.
  • Inventories of copper tracked by the LME have surged 25 percent over the past four days to the highest since November. Metal held in Asian depots are at the highest level since October 2013. Barclays Plc also flagged risks of a “sharp slowdown” in copper demand from China in the second half, after the country cut imports to the lowest in 17 months.
  • Zinc for immediate delivery earlier traded at a $7.25-a-ton premium to the benchmark three-month contract, the widest backwardation in 15 months.
  • Aluminum and tin also fell in London, while zinc and lead gained.
  • Copper futures for December delivery dropped 0.1 percent to $2.083 a pound on the Comex in New York.