Bets of looming Chinese output cuts spur nickel

LONDON — Nickel prices hit a one-month high on Friday on concerns China might order further output cuts as it ramps up efforts to clean its skies, while aluminum gave back gains after rising on news a Chinese city had ordered capacity reductions.

China’s Communist Party Congress takes place this week and markets expect Beijing could broaden efforts to eliminate more polluting mines and metal plants, especially during the winter months.

In aluminum news, the city of Binzhou, home to top global aluminum maker China Hongqiao Group, has ordered 2.57 million tons of annual smelting capacity to be closed this winter.

“The China environmental cuts are definitely having an impact. The concern is they could spread. On the nickel side there’s been reports we may see capacity cuts in nickel pig iron,” said Warren Patterson, commodities strategist at ING. “The global economy is ticking along, China’s come back from holidays more bullish (and) every data point we see out of China, out of the US, out of Europe, looks fairly positive.”

China’s import and export growth accelerated in September, data showed, suggesting the economy is expanding at a healthy pace despite widespread forecasts of an eventual slowdown.

Three- month nickel on the London Metal Exchange (LME) ended up 2.50% at $11,675, having hit a one- month high of $11,725.

Aluminum ended down 0.60% at $2,134 a ton having rallied earlier on the output cut news; copper closed down 0.10% at $6,882, having hit a one-month high of $6,918.50, while zinc ended down 0.50% at $3,235.

China’s factories splurged on imported commodities last month amid rising costs and tighter raw material supplies driven by Beijing’s anti-pollution campaign.

But the strength is unlikely to be sustained as many companies curb production during winter.

China’s copper imports climbed 26.50% in September from a year earlier, hitting their highest monthly level this year.

China aluminum exports fell 10% in September from August, hitting their lowest since February.

Indicating tight supply, cash zinc traded at a premium of $76 a ton to the three-month price, its highest level on Reuters data going back to June 2009.

LME data showed on-warrant or available zinc stocks fell to 122,425, down some 60% this year.

Tin ended down 0.70% at $20,600 while lead closed down one percent at $2,530. —