Nickel, Copper Fall in Asia, Despite China Production-Cut Plans
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ScrapPrices
Published on November 30,2015 05:23 AM Metal Exchange
Pressure from soaring U.S. dollar outweighs Chinese producers’ plans to boost prices by reducing outputs
Nickel, Copper Fall in Asia, Despite China Production-Cut Plans

Nickel and copper prices fell in Asia trade Monday, as the impact of likely production cutbacks by Chinese metal producers were largely outweighed by the dollar’s continuing strength.

Eight leading Chinese nickel producers said in a statement over the weekend that they plan to reduce production by 15,000 metric tons of nickel next month, and cut output by at least 20% in the next year in response to low prices. Nickel prices have slumped nearly 50% since the beginning of this year.

Despite the statement, the three-month nickel futures price on the London Metal Exchange fell by 0.5% from the previous close, to $8,740 per metric ton, with investors remaining uncertain over how soon the cuts will unfold and whether they will be enough to offset China’s weak demand.

“If the production cuts are implemented well, the global market will see more deficits in 2016,” said  Helen Lau, an analyst with Argonaut Securities.

Sliding metals prices have also prompted Chinese copper producers to consider production cuts, a move that could be completed this week, analysts said. Producers may cut output by around 200,000 tons, or about 5% of the 2015 total, Argonaut estimates.

Nevertheless, three-month copper futures prices on the London Metal Exchange fell by around 0.8% Monday from their previous close, to $4,545 per ton.

Besides the uncertainty over the timing of the production cuts, the dollar’s strength—due to expectations that the U.S. Federal Reserve will raise interest rates next month—is weighing on prices of all metals, said Gnanasekar Thiagarajan, director of Commtrendz Risk Management.

A stronger dollar and relative weakness in the Chinese yuan will make copper and some other industrial metals more expensive for Chinese importers, he said.

The U.S. dollar has gained amid widening divergence between the monetary policies of the Federal Reserve and European Central Bank. The WSJ Dollar Index, which tracks the dollar’s value against 16 currencies, hit a 13-year high on Friday in the U.S.

Investors are awaiting the release of U.S. nonfarm payrolls data this week, which could firm up the chances of a rate increase next month.

Metals have also come under pressure after three of China’s largest brokerages said they were being probed by the country’s securities regulator because of a suspected violation of rules, a move that could lead to greater volatility in China’s stock markets. That contributed to a fall in Shanghai-listed shares Monday.

Prices of metals such as copper have often fallen along with Chinese stocks in past weeks as traders have turned to metals to express their bearish positions due to trading restrictions on Chinese stocks.

 

Courtesy: WSJ

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