London Metal Exchange nickel tumbled nearly 5% on fund liquidation Monday in a reversal to Friday's trading, with analysts expecting further volatility in the base metals complex amid market uncertainty.
Three-month nickel prices dropped to a one-week low of $35,625 a metric ton before recouping some of those losses to a PM kerb of $35,655/ton.
As the only metal not to suffer losses during Friday's major sell-off, nickel prices tumbled Monday driven by fund selling, said an LME trader, to bring the metal in line with the rest of the base metals complex.
However, volumes have been relatively light as investors are sitting on the sidelines waiting to see if the selling continues, the LME trader said. Earlier Monday, it looked as though all the metals were showing a bit of a bounce, but the closes now look poor and further fund liquidation is expected over the next few days, the trader added.
In news, CVRD Inco said it will resume clearing land at its Goro nickel mining project in New Caledonia after winning an appeal Friday filed to overturn a French court ruling that required the company to stop its work there, the company said.
After double digit declines Friday, three-month zinc has modestly recovered, bouncing off the lows by roughly 0.5% to a PM kerb of $3,090/ton, after LME stocks posted a drawdown by 475 metric tons to 97,875 tons Monday.
Three-month copper, which also tumbled to an 11-month low Friday, has rebounded modestly by 0.1% to a PM kerb of $5,335/ton in large part due to a drawdown of stocks by 1,225 tons to 214,025 tons Monday.
Widespread liquidation among the hedge fund community pummeled LME copper and zinc Friday based on market talk that U.S.-based Red Kite Management, a $1 billion metals-trading hedge fund firm, was seeking to extend the notice period for investor redemptions from 15 days to 45 days after recent losses.
"These are the types of requests that, when leaked, are anathema to participants involved in the underlying sector, and the sell-off in metals on Friday proved the point," said Man Financial analyst Ed Meir.
Rising stocks and concerns of a surplus situation this year are also weighing on prices, but analysts said the recent fall was overdone.
Over the weekend, unionized workers at BHP Billiton Ltd.'s (BHP) Cerro Colorado copper mine in Chile received a sweetened contract offer from the company Sunday, and voted to accept it, calling off a strike planned for Feb. 7, a union leader said late Sunday.
In other news, the London Metal Exchange is to launch three new regional plastics contracts and will introduce additional prompt dates to more closely reflect the prompt date system currently available for non-ferrous metals, it said in a statement Monday. The changes will be effective June 25, and are the result of a recommendation by the LME Plastics Committee.
Prices in dollar a metric ton.
3 Months Metal Bid-Ask Change from
Friday PM kerb
Copper 5335.0-5340.0 Dn 10
Lead 1600.0-1600.5 Dn 30
Zinc 3090.0-3100.0 Up 10
Aluminium 2711.0-2712.0 Dn 9
Nickel 35655.0-35695.0 Dn 1695
Tin 11895.0-11900.0 &nb
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