April 12, 2016 / 10:22 AM / 4 years ago

METALS-Nickel hits three-week high, copper also up as oil rises

* Signs in China point to tightening local physical market

* Nickel to trade in $8000-$9000 a tonne range - Triland

* Chinese aluminium output falls in February-IAI (Updates with closing prices)

By Eric Onstad

LONDON, April 12 (Reuters) - Nickel the highest in over three weeks while other metals also gained on Tuesday, bolstered by higher oil prices and hopes that production cuts at mines were starting to curb surpluses.

Oil prices hit fresh five-month highs after a report that top producers Russia and Saudi Arabia have agreed to freeze output.

“If oil keeps rising, the inflation risk is getting higher and it’s hard to see a falling copper price,” said Richard Fu, head of Asia and Pacific at Amalgamated Metal Trading in London.

Metals extended gains despite a stronger dollar, which rebounded from a more than seven-month low against a basket of currencies.

Earlier, a softer dollar had supported metals markets, but the bounce in the greenback failed to dampen the advance in metals. Usually a firmer dollar curbs metal prices by making commodities priced in the U.S. currency more expensive for buyers using other currencies.

Investors were waiting for upcoming reports from mining groups, which will give signals about how production suspensions and closures have affected overall output levels.

Three-month nickel on the London Metal Exchange surged 3.6 percent to close at $8,860 a tonne after touching $8,890, the highest since March 18.

Nickel, mainly used to make stainless steel, slid more than 40 percent last year, which has piled pressure on producers.

“The production side has been very constrained, there have been a lot of closures, although of course there are still an awful lot of stocks out there for the market to absorb,” said Macquarie analyst Vivienne Lloyd, who expects prices to rise further.

Despite solid warrant interest, mainly for financing and arbitrage purposes, broker Triland said in a note: “The flat price shows no sign of breaking out of its $8,000 to $9,000 range. Producers are ready to sell rallies above $9,000.”

LME zinc shot up 4 percent to end at $1,833 a tonne after LME inventories fell 6,025 tonnes or 1.4 percent, the biggest decline since September 2007.

LME zinc stocks have shed 16 percent since Feb. 18 as the impact of mine shutdowns is felt in the market.

LME copper climbed 2.2 percent to close at $4,765 a tonne, climbing away from seven-week lows as encouraging economic signals from China were offset by a looming slowdown in seasonal demand.

Aluminium finished 1.7 percent higher at $1,534.

Chinese aluminium production in February fell to 2.07 million tonnes, down from 2.48 million in January, data from the International Aluminium Institute showed.

Tin closed up 0.2 percent at $16,750 while lead gained 1.7 percent to $1,725.


Three month LME copper

Most active ShFE copper

Three month LME aluminium

Most active ShFE aluminium

Three month LME zinc

Most active ShFE zinc

Three month LME lead

Most active ShFE lead

Three month LME nickel

Most active ShFE nickel

Three month LME tin

Most active ShFE tin (Additional reporting by Melanie Burton in Melbourne; Editing by Susan Thomas and Louise Heavens)

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