Nickel Touches Two-Week Low as Supply Concerns Ease; Zinc Drops

  • Supply may be better than expected from Indonesia, Philippines
  • Stronger dollar also curbing demand as Chinese markets shut

Nickel touched a two-week low as concerns about supply restrictions eased.

Indonesia is finalizing revisions to regulations that will allow exports of processed metal concentrates for a further three to five years and may permit sales of low-grade nickel ore. There has also been speculation that Philippine mines may avoid shutdowns after a government audit. After entering a bull market last week, the London Metal Exchange’s index of base metals has retreated as the dollar rebounded.

The Philippine "government seems to be somewhat softening its approach," Daniel Briesemann, an analyst at Commerzbank AG in Frankfurt, said in an e-mailed note. "Nickel supply may not be reduced quite as sharply after all. More nickel could also be supplied to the market from Indonesia again."

Nickel for delivery in three months settled unchanged at $10,080 a metric ton at 5:50 p.m. on the LME, after touching $9,945, the lowest since Sept. 19.

Prices had rallied as much as 25 percent this year on concerns about supply restrictions, just as inventories tracked by the LME fell to the lowest in two years. That prompted money managers to boost their net bullish position to the highest in data going back to mid-2014.

Stronger Dollar

Most other base metals fell on Wednesday as the Bloomberg Dollar Spot Index climbed near a two-week high, making materials priced in greenbacks more expensive for buyers using other currencies. The prospect of monetary policy turning less accommodative in the biggest economies has also damped risk appetite.

Markets in China, the biggest metals consumer, are shut for a week-long holiday.

"There is little to say about such thin markets with all the metals coming under pressure from a strong U.S. dollar, the reasoning of which seems to be a Fed rate rise before year-end," Malcolm Freeman, a director of Kingdom Futures Ltd. in London, said in an e-mailed note.

In other metals news:

  • Zinc fell, capping a two-day decline of 2.6 percent, the most since July. Copper and lead also retreated in London, while tin and aluminum gained.
  • A gauge of 18 global base metal producers gained 1.5 percent, led by Teck Resources Ltd. and Freeport-McMoRan Inc.

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