Nickel slides to 7-month low on tariff, China worries

LONDON — Nickel sank to its lowest in more than seven months on Monday, weighed down by worries about China’s economy, escalating trade tensions and weak steel prices.

Manufacturing activity in China, the world’s biggest consumer of base metals, grew last month at its slowest rate in more than a year, with export orders shrinking for a fifth month and employers cutting more staff, the Caixin/ Markit Manufacturing Purchasing Managers’ Index showed.

“I’m surprised that any of the metals are up today, given the combination of the Caixin PMI in China, the lack of progress on NAFTA talks and the tit-for-tat tariff contest between China and the US,” said Caroline Bain, chief commodities economist at Capital Economics in London.

“Nickel is quite tied up with the stainless steel industry, which has been directly affected by tariffs already, so that might be why it has been particularly hard hit.”

Also weighing on nickel, mainly used to make stainless steel, was another fall in construction steel rebar prices in Shanghai after their weakest weekly performance since late March.

Benchmark nickel on the London Metal Exchange (LME) tumbled to $12,695 a ton, its lowest since Jan. 23, before recovering to $12,790 by the close of open-outcry trading. That represented a decline of 0.1%, adding to Friday’s 3.7% fall.

LME copper slipped to its weakest since Aug. 23 at $5,950.50 a ton before paring losses to end at $5,967, down 0.1%. Prices on Friday fell 1.5% to take August’s decline to 5.5%. It was the biggest monthly drop in two years and the third monthly fall in a row.

Historically, a one percentage point decline in global trade growth has reduced copper prices by about 4%, analyst Michael Widmer at Bank of America Merrill Lynch said in a note.

“If global trade growth fell from April’s 4.4% YoY to the 2015/16 average of 1.7%, copper prices could correct by 10.8% YoY to $5,400/t.”

Three-month zinc rose 0.2% to finish at $2,463 a ton. “We note the sharp rise in reported Shanghai zinc CIF premiums from $160/ton to $230,” Alastair Munro, of broker Marex Spectron, said in a note.

LME lead was the strongest performer, climbing 2.1% to close at $2,121 a ton as inventories continued to fall. It touched an intraday peak of $2,131.50, the strongest since Aug. 9. Aluminum shed 1.3% to $2,097 a ton and tin dropped 0.8% to $18,840. —