Nickel falls after stockpiles jump to 11-month high

Nickel declined in London, snapping two days of gains, after stockpiles climbed to the highest in almost 11 months. Lead fell on prospects of increased supply as Xstrata Plc said it will lift restrictions on metal deliveries from its UK smelter after a five-month disruption.

Inventories of nickel tracked by the London Metal Exchange jumped 6.3 per cent to 8,460 metric tonnes, the exchange said on Tuesday in a daily report. That's the highest since July 10 last year.

Production will beat usage by 70,000 tonnes this year, reversing the 2006 shortage, the International Nickel Study Group said on May 14.

"We expect more deliveries of nickel," said Andrew Silver, a trader at London-based Natixis Commodities Markets, one of 11 companies that trade on the LME floor. "There's more room for prices to fall. Demand is pretty lacklustre as well, as prices are incredibly high."

Nickel for delivery in three months dropped $1,050, or 2.2 per cent, to $46,600 a metric tonne as of 10:16am local time.

The metal, used in stainless steel, has fallen 10 per cent since trading at a record high of $51,800 a tonne May 9 because users including Outokumpu Oyj, the world's third-largest producer of the alloy, are reducing usage.

Lead, used in car batteries, fell as much as $70, or 3 per cent, to $2,300 a tonne. The metal traded at a record $2,395 a tonne on June 1.

Full deliveries from the Northfleet smelter will resume on July 1, Xstrata spokeswoman Sue Sara said on Tuesday from Brisbane. The temporary restriction on shipments started in February because of lower concentrate supplies from the Mount Isa mine in northern Australia.

"Lead is very sensitive to any supply news as the market is tight," Kevin Touhy, a trader at London-based Man Financial Inc, said on Tuesday by phone.

Among other LME-traded metals, aluminum fell $17 to $2,809 a tonne, zinc fell $50 to $3,790 and tin dropped $50 to $13,950. Copper declined $19 to $7,606.