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LME nickel off highs,still bullish

LONDON: London Metal Exchange (LME) nickel took a breather from its intra-day highs in Friday's afternoon kerb but looks set to sprint ahead next week, traders said.

After aggressive fund and bank buying which saw the three-months contract quoted at a 46-month high of $8,780/8,800 a tonne at the midsession, nickel retraced on profit-taking in the afternoon kerb.

The contract finished at $8,640, $115 up on Thursday's close and above $8,620, which Roy Carson of LME trader ScotiaMocatta said was the required finish to keep $8,800 the near-term target.

A supply deficit coupled with strong demand for stainless steel, accounting for two-thirds of total nickel demand, has underscored the metal's surging price.

Global stainles steel production rose 13.2 percent in the fourth quarter of 1999 and is expected to rise at double-digit rates again in the first and second quarter of 2000, analysts at Macquarie Equities Ltd said on Friday.

Meanwhile LME nickel inventories, at 42,708 tonnes on Friday, have fallen to their lowest levels since 1991.

Across the rest of the complex prices inched down.

Although copper has enjoyed good buying from Asia it ended Friday $6 down at $1,858. Indeed Far Eastern buying interest is poised to taper off next week on account of the Chinese lunar holiday.

"There has been healthy arbitrage between Shanghai and London but that will probably level off next week," said Tariq Salaria, analyst at Brandeis brokers.

Aluminium closed $2 down at $1,714 despite continuing fund interest. The metal has been plagued by a shortage in alumina, the raw material for aluminium.

The forward spreads remain locked in backwardation. Cash/threes was quoted at $9/$11.50 and February/March $13/$14.

Ukraine's only alumina producer, Mykolayivsky Hlynozemny Zavod (NGZ), said on Friday that it had contracted for 1.66 million tonnes of bauxite, the raw material for alumina.

Earlier this month the company had said it would increase its alumina output to 1.1 million tonnes in 2000, its highest output for 20 years.

Trade selling nudged zinc down $4 to $1,153.

Although seasonally this is lead's strongest demand period the three-months contract remains stuck in its narrow $475-$485 range, finishing $3 down at $482.

Tin was indicated $5 down at $5,840/50 and aluminium alloy $10 up at $1,440/50.

Silver was indicated at 540/545 cents an ounce compared with 526/531 cents on Thursday.-Reuters