Metals melt on glut fears

Nickel and copper fell in London as stockpile increases stoked speculation of a glut of metals in the international markets. Aluminium and zinc also dropped.

Nickel for delivery in three months dropped $950 a tonne, or 3.4 per cent, to $26,750 a tonne as of 10 am local time. The contract has fallen 46 per cent since reaching a record on May 9 as stockpiles rose. Copper fell $115.75, or 1.6 per cent, to $7,199 a tonne, paring last week's gain of 4.4 per cent.

Copper inventories monitored by the London Metal Exchange (LME) rose 8 per cent to a three-month high, data from the bourse showed today. Stockpiles of nickel increased 9.4 per cent to the highest in 15 months.

"The nickel stockpile increase reflected a market with oversupply due to weak demand,'' Stephen Briggs, a metals analyst at Societe Generale in London, said today in a phone interview. Briggs has tracked the metals industry since 1980.

Inventories of nickel have more than tripled this year after the metal climbed to an all-time high of $51,800 a tonne. Of the total LME-monitored stockpiles, 84 per cent are in European warehouses, reflecting weaker demand in the region.

The 1,980-tonne stockpile increase recorded today was in Liverpool, England, an inconvenient location for delivery to European consumers, Kevin Tuohy, a trader at MF Global, said today by a phone interview in London. Rotterdam, the largest warehouse location in Europe, is usually the place where consumers order metals. "It's going to be kept in Liverpool'' until European demand recovers, Tuohy said.