Although lead and aluminum recently gained, nickel and zinc went in the opposite direction. Nickel for three-month delivery lost 3.2 percent to dwindle at $17,450 per metric ton earlier this week. Similarly, zinc stockpiles hit a 23-month high, leading to a 2.1 percent price drop at $1,730 per ton, the lowest levels the metal has seen since late 2005.
“As LME inventories increased, investors’ assessment of the market has changed,” Tobias Merath, a commodity analyst at Credit Suisse Group in Singapore, told Bloomberg. “They see it as a sign of weakening demand.”
This weakening demand, along with rising production, should affect zinc and nickel markets throughout the next half of 2008. In fact, many analysts predict that global supplies of refined zinc will outstrip consumption, and this excess amount could add up to more than half a million tons. The global economy is feeling the pinch, and some zinc producers might have to cut output. According to one report, “News last week that a top producer in China had cancelled its tax rebate on super high-grade zinc was supportive, although it would be offset largely by demand weakness, said Graham Deller of industry consultants CRU Group.”
Nickel, on the other hand, has a more controversial future, with some analysts expecting prices to pick up and others declaring that we’ll see further price weakness as the year progresses. Either way, the current numbers make it clear that manufacturing stagnated and even fell in China, Europe and the U.S. last month, slowing demand for numerous industrial metals.