LONDON (Commodity Online): The metals ended last week mixed with only copper up w/w. Despite falling stocks and further delays to new projects, one metal that has continued to underperform recently is nickel. Expectations for stronger supply growth in H2 as previously shuttered facilities are restarted have been weighing on prices which are now trading at $21,500/t.
However, the fall in prices has begun to put pressure on the industry’s marginal producers, nickel pig iron, in China. Prices have begun to eat into the cost curve resulting in negative margins for some of these high-cost producers. Metal Bulletin has reported that cost-related and power-related cutbacks at some NPI producers is tightening the domestic market where stainless demand is strong resulting in stronger domestic Chinese prices versus the LME.
In other fundamental news, there have been plenty of remainders of how fragile the copper mine supply is with mining temporarily disrupted over the weekend following a power outage that affected the power grid in northern Chile. Output was only affected for a few hours with mines in the region reported to be back to normal by Sunday.
The disruption was caused by heavy rains and high winds. Most mines have back-up power generators and are able to utilise these during short periods of power disruption. Elsewhere on the copper supply side, many contractors are still on strike at Codelco’s 405Ktpy El Teniente copper mine in Chile. Some contractors have returned to work, as have some full-time workers, allowing the mine to increase production slightly to 73% from a previous 70%.
Last week the company said it had lost around 7Kt of copper as a result of the strikes, a number which is still continuing to grow on the almost four-week long protest. And on the demand side, shipments of Japanese copper wire and cable have made a remarkable recovery following the tsunami and earthquake, rising 3% y/y in May to 51.2Kt.
Shipments to the construction sector rose 17.5% and 48% to the communication industry due to demand for temporary housing and reconstruction. This recovery is faster than we had anticipated. While data on US aluminium demand remain very positive with the Metals Service Centre Institute data on US shipments showing a strong increase in the pace of growth in aluminium shipments in May, shipments rose a whopping 31% y/y, up from 22% the previous month illustrating the strength in underlying demand.