Metal markets on the decline
LONDON -- Nickel will lead a decline in industrial metals this year as stockpiles expand and demand slows with the U.S. housing market, a survey of analysts showed.
Nickel for immediate delivery will average $29,500 a metric ton this year on the London Metal Exchange, according to the median of 19 analysts surveyed by Bloomberg News in December. The price is 21 percent below 2007's average and 46 percent less than the record set in May. Lead will be the best performer for a second year, with a 4 percent gain, the survey showed.
Industrial metals are falling for the first time since 2001 as the deteriorating U.S. housing market curbs demand for copper, zinc and tin. Copper inventories increased 8.5 percent last year and are four times higher than at the end of 2004, LME data show.
"The U.S. housing market won't turn around until the first quarter of 2009, and that will be difficult for base metals," said Bill O'Neill, a partner at Logic Advisors in Upper Saddle River, N.J. O'Neill gave the most accurate forecast for nickel last year among 28 analysts surveyed by Bloomberg.
The five-year rally generated record profits for Melbourne-based BHP Billiton Ltd. and Rio Tinto Group, based in London. The gains also prompted $156.4 billion of mergers among mining companies this year.
Nickel is the second-worst performer among the six metals traded on the LME, falling 24 percent to $25,805 a metric ton on Monday. Zinc fell the most, losing 47 percent to $2, 290 a ton.
LME-monitored stockpiles of nickel, mostly used in stainless steel, surged almost sixfold this year. The slump in prices prompted steelmakers, including Dusseldorf-based ThyssenKrupp AG, to write down the value of inventories.
Lower prices failed to curb supply. Production will probably exceed demand by 100,000 tons in 2008, according to Alan Heap, director of commodity analysis at Citigroup Inc. in Sydney. That's more than twice the metal held in warehouses monitored by the LME.
Heap expects nickel to average $22,046 a ton this year, the lowest forecast among the analysts surveyed.