October 20, 2017 / 10:45 AM / 2 years ago

METALS-Nickel hits six-week high as investors see wider deficits

* LME/ShFE arb: bit.ly/2wZSAEz (Adds closing prices/details)

By Maytaal Angel

LONDON, Oct 20 (Reuters) - Nickel prices hit a six-week high on Friday, helped by expectations that market deficits will widen in the future, while copper gained on an optimism demand will grow in top consumer China.

The global nickel market swung to a wider deficit of 6,700 tonnes in August from the month before, as nickel production at Brazil’s Vale fell 4.3 percent year-on-year in the last quarter .

Deficit expectations rather than cost of production are lifting nickel prices, according to Colin Hamilton, head of commodities research at BMO Capital Markets.

“Nickel prices are set by the cost of making nickel pig iron in China and (price) moves like we’ve seen are probably detaching from that anchor,” he said.

Helping copper prices was the receding fear over a slowdown in China’s growth. Investors took the view that the market over-reacted to a warning on Thursday by the Chinese central bank chief about asset bubbles.

“The industrial backdrop is generally pretty good in China,” said Hamilton.

China’s factory output grew 6.6 percent year-on-year in September, beating expectations. Fixed-asset investment expanded 7.5 percent in January-September, missing forecasts.

NICKEL: Three-month nickel on the London Metal Exchange closed flat at $11,735 a tonne, after hitting $12,165, its highest since Sept. 8. Nickel has gained almost 0.5 percent this week, clocking a fourth weekly rise.

SUPPLY: Jinchuan Group, China’s top nickel producer, will next year start building a new project in Guangxi that will produce raw materials like nickel and cobalt for electric vehicle batteries.

COPPER: LME copper ended down 0.2 percent at $6,952 a tonne, having rallied at the start of the week above $7,000 for the first time since September 2014.

COPPER SUPPLY: Kobe Steel has stopped shipping about 43 percent of copper products from Hatano plant, near Tokyo, because it was found to violate Japanese Industrial Standards regulations.

SOUTHERN COPPER: Southern Copper’s net profit doubled to $401.8 million in the third quarter from the same period a year earlier as sales surged on higher copper prices.

ALUMINIUM CUTS: Xinfa Group, one of China’s top aluminium producers, will have to close 381,900 tonnes per year of smelting capacity this winter, its home city of Liaocheng confirmed on Friday.

“Further declines in Chinese aluminium production pushed prices back towards the yearly highs. However, judging by ballooning inventories, much higher private production estimates and raw material supplies, we doubt the official production data,” said Julius Baer in a note.

METAL PRICES: Zinc ended down 0.5 percent at $3,100, aluminium closed down 0.8 percent at $2,136, lead was last bid down 0.2 percent at $2,465 and tin closed down 1.4 percent at $19,575, having earlier hit a two-month low.

Additional reporting by James Regan in Sydney and Manolo Serapio Jr in Manila, editing by Larry King

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