Metals markets faltered on Thursday, with nickel down more than 5 percent, as worries about the global economy intensified and on profit taking as the rebalancing of commodity indices started.
Buying ahead of re-weighting of the Dow Jones AIG Index and S&P GSCI earlier this week turned to selling as the S&P rejig started and the market focussed on weak economic data.
"Nickel is particularly volatile," analyst Leon Westgate at Standard Bank said. "It looks like another bumpy ride particularly while the index re-balancing is taking place and the added uncertainty it brings."
London Metal Exchange nickel dipped to $11,600 a tonne by mid-session, down 5.7 percent or $700 and off a two-month high of $13,550 hit earlier this week.
The metal, a key ingredient in stainless steel, has rallied as much as 16 percent since the start of 2009.
Three-month copper fell $135 or 4 percent to $3,205/3,210 a tonne. On Wednesday, prices surged as much as 5.3 percent to a one-month high of $3,570, up 16 percent so far this year.
Copper was under pressure from rising LME stocks and news of smelter cutbacks in South Korea did little to help prices.
LS-Nikko Copper, one of the world's largest copper smelters, will cut cathode output by about 10 percent.
Sluggish demand in a slowing world economy has resulted in cutbacks of all metals and analysts are keeping a close eye on U.S. economic data this week for clues about the health of the world's largest economy.
JOBLESS
The number of U.S. workers filing new claims for unemployment benefits fell unexpectedly by 24,000 last week, government data showed on Thursday, but the number of people remaining on jobless rolls rose to a new 26-year high.
Wednesday saw a larger-than-expected drop in U.S. private-sector jobs, which could foreshadow more grim non-farm payrolls data from the U.S. government on Friday.
"Non-farm payrolls are expected down around 500,000 but the ADP number came out down 693,000 and could indicate that the government numbers will be worse than we think," MF Global analyst Edward Meir said.
Copper stocks continued to rise in LME warehouses, up 6,375 tonnes at 357,700 -- levels last recorded in January 1994 -- and aluminium inventories rose by 23,825 tonnes to 2.39 million, the highest in over 14 years.
LME aluminium slipped $43 or 2.7 percent to $1,551.
A drop in aluminium prices from record highs in July of $3,380 a tonne as demand slumped has forced a number of producers to cut output and postpone future projects.
"At prices of around $1,500, many aluminium companies are no longer able to cover costs," analyst Eugen Weinberg at Commerzbank said in a report. "We therefore expect further closures to take place."
Alcoa Inc, the largest U.S. aluminium producer, said on Tuesday it would slash more than 15,000 jobs, halve capital spending and sell four businesses as it reduces output to cope with the global economic downturn.
Dutch aluminium producer Vimetco said on Wednesday it has cut aluminium output in Romania by 44,000 tonnes this year as a result of lower prices. But the reductions may not be enough.
"Globally, the industry has cut the equivalent of around 5 million tonnes a year," MF Global's Meir said. A five million tonne cut is equal to around 10 percent of world capacity.
"That should have been enough to support the market, but the stocks keep on rising and while that continues, there is still room for further cuts."
LME zinc dropped 2.3 percent to $1,250.5 per tonne, lead was little changed at $1,145 from $1,139/1,140 and tin dropped 4.7 percent or $550 to $11,075.
Metal Prices at 1339 GMT Metal Last Change Percent Move End 2007 Ytd Percent
move COMEX Cu 146.65 -2.80 -1.87 139.50 5.13 LME Alum 1545.00 -49.00 -3.07 1535.00 0.65 LME Cu 3205.00 -135.00 -4.04 3060.00 4.74 LME Lead 1135.00 -43.00 -3.65 999.00 13.61 LME Nickel 11475.00 -825.00 -6.71 11700.00 -1.92 LME Tin 11150.00 -475.00 -4.09 10700.00 4.21 LME Zinc 1250.00 -30.00 -2.34 1208.00 3.48 SHFE Alu 11735.00 -435.00 -3.57 11540.00 1.69 SHFE Cu* 25760.00 -480.00 -1.83 23840.00 8.05 SHFE Zin 10580.00 -360.00 -3.29 10120.00 4.55 ** 1st contract month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07
