Nickel hits new high, eyes $40,000

LONDON, Jan 26 - Nickel hit a fresh high on Friday for the eighth session running on strike fears, while rising stocks knocked sentiment in copper, analysts said.

Copper's 4,325 tonne run-up in inventories dampened, while nickel touched $38,950 per tonne, up more than 15 percent since the start of the year.

"Nickel may prove to be the exception in any pause, as strike action at Sudbury -- if it materializes -- may be just enough to take prices to the $40,000 level," analyst Edward Meir at Man Financial said in a report.

The latest rally started after workers at London-listed Xstrata nickel operations in Sudbury, Ontario, failed to reach a new contract agreement over pay.

If the parties do not reach an agreement by midnight Jan. 31, more than 1,000 unionised mine workers could go on strike. [ID:nL26847406]

The Sudbury complex accounts for just more than 4 percent of world nickel smelting capacity.

"LME stocks continue to drop alarmingly and a strike in Sudbury is looking likely," analyst Stephen Briggs at Societe Generale Corporate and Investment Banking (SGCIB) said in a report.

Available stocks of nickel at around 2,700 tonnes are less than one day's global consumption. They have fallen from around 37,000 at the beginning of last year.

Nickel closed at $38,100 from $38,145 on Thursday.

COPPER UNDER PRESSURE

Three-month copper closed at $5,810 against $5,850 on Thursday, when it touched a two-week high of $5,910.

It hit a low for the day of $5,715, down by 2.3 percent.

At the New York Mercantile Exchange's COMEX division, copper for March delivery settled down 1.75 cents at $2.6370 a lb, after dealing between $2.5850 and $2.66.

Stocks of copper in LME warehouses rose to 207,700 tonnes, more than double the levels seen last January.

"LME stock increases seem to be taking their toll," Meir at Man Financial said.

Economic slowdown in the United States, falling demand and rising stocks have hit copper in recent months. Prices are down more than 30 percent since May's record high of $8,800.

But after heavy destocking in 2006, Chinese buyers were expected to return to the market.

Briggs at SGCIB said LME stocks were up sharply but pointed to hints of a pick-up in Chinese buying supporting prices.

China's copper imports rose 59.4 percent year-on-year in December to 95,831 tonnes, suggesting consumers there were restocking after running down inventories through most of 2006.

"In the last week or so there's definitely been some price stability," said Adam Rowley, analyst at Macquarie Bank.

"There are some signs of increased consumer buying and obviously the Chinese import figures helped. Over the next couple of months if Chinese buying continues to pick up the market could be fairly balanced for a period."

Tin hovered below this week's record high of $12,500.

It ended at $12,200 from Thursday's last bid of $12,275.

Traders said fund buying on the back of worries about supplies from Indonesia had pushed the metal to new highs in recent weeks.

Aluminium futures for delivery in three months closed at $2,795, up from $2,792 on Thursday but below Wednesday's four-week high of $2,846.

Aluminium has been buoyed recently by a strike in Guinea that has disrupted shipments of bauxite.

Zinc closed at $3,640 versus $3,710 on Thursday and lead lost $28 to close at $1,675.