Nickel crops most in two months as dollar rally fuels fund sales

(Bloomberg) — Nickel plunged by the most in two months in London as unexpectedly strong US jobs data triggered a spike in the dollar and a selloff across base and precious metal markets.

Nickel prices slumped as much as 5.8 per cent to $13,185 a ton on the London Metal Exchange, retreating from two-year highs struck earlier in the week as investors reacted to the rallying dollar and a fundamental outlook that’s been shaken by rising output in Indonesia.

“The thing about nickel is that it’s a metal that funds can push about quite a lot in the short term,” Colin Hamilton, managing director for commodities research at BMO Capital Markets, said by phone from London. “But certainly from a fundamental point of view, the move is justified.”

After reaching as low as $10,740 in early December, nickel rallied as stockpiles held on the London Metal Exchange fell to the lowest in three years and surging global manufacturing boosted the demand outlook for commodities. But supply concerns have returned to the fore this week as output hit record levels at Indonesian producer PT Aneka Tambang, Hamilton said.

Antam sold 2.8 million wet metric tons of nickel ore in 2017, a 285% increase on the prior year, it said in a statement on Monday. Ferronickel production rose 7 percent to a record 21,762 tons of contained nickel.

The metal used in stainless steel bore the brunt of losses as all metals except tin dropped on the LME. Copper slumped 1.1 percent, wiping out weekly gains, while gold dropped the most in eight weeks and oil also slumped.

The selloff on Friday highlights the vulnerability of risk assets like commodities to any bouts of dollar strength, ICBC Standard Bank analyst Marcus Garvey said in said in an emailed note. “The selling may be a flash in the pan, but it’s worth considering the general market vulnerabilities to any change in the current dynamic of flatter U.S. yield curve, weaker U.S. dollar, stronger risk assets.”

Story by Mark Burton.